Question

answer The following questions

1. Calculate the amount of depreciation expense to report for the years ended December 31, 2016 and December 31, 2017 for equipment purchased on July 1, 2016 for $26,000. The equipment has a salvage value of $2,000 and an estimated useful life of 4 years or 24,000 hours. Assume the equipment was used for 2,000 hours from July 1, 2016 to December 31, 2016. Assume the company uses: a) Straight Line method: 2010 4carl partial (oo0xlaa aoi:ycara tul year -ta ooD-200014 S60 b) Double declining Balance method: c) Units of Production method: 2. Prepare the Journal Entry to record the depreciation for a) above: Account Titles & Explanation Credi Debit Date

Answer 1

a. Computation of Depreciation expense to be recognized under Straight Line Depreciation Method :-
	Depreciation Expense	=	Depreciable Amount
			Useful Life
	Depreciable Amount	=	Cost - Salvage value
a	Cost	=	$                                 26,000
b	Salvage value (residual value)	=	$                                   2,000
c	Depreciable Amount (a-b)	=	$                                 24,000
	Useful life (in years)	=	4
	Annual Depreciation Expense	=	$24,000
			4 years
		=	$6,000
Year	Straight Line Method
	Calculation		Depreciation Expense
2016	Half year depreciation = 6000 * 1/2		3000
2017	Full year depreciation		6000

b. Computation of the depreciation expense to be recognized under the 200 percent declining-balance method :-
Double (200%) Declining Balance Method of Depreciation
Double Declining Balance Depreciation		=	2 × Straight line Depreciation rate × Book value at the beginning of the year
	Cost		=	$                                          26,000
	Salvage value		=	$                                            2,000
	Useful life		=	4
	Straight line Depreciation Rate		=	100
				4
			=	25.00%
	Double (200%) Declining Balance Depreciation Rate		=	2 * 25%= 50%
Annual Period	Depreciation for the period				End of Period
	Beginning of Period Book Value	Depreciation Rate		Depreciation Expense	Accumulated Depreciation	Book Value
a	b		c	d = b*c	e	f = b-d
2016	26,000	50% * 1/2 = 25%		$                                      13,000.00	$                      13,000.00	$                     13,000
2017	13,000	25%		$                                       3,250.00	$                      16,250.00	$                       9,750

Calculation of Depreciation expense under the Units-of-output depreciation method:-
Units-of-output depreciation method :-
(	Cost	-	Residual value	) ∕	Useful life in hours	=	Depreciation per hour
(	$26,000	-	$2,000	) ∕	24,000	=	$1.00
	Depreciation per hour			×	2016 used hours	=	Depreciation expense for 2016
	$1.00			×	2,000	=	$2,000
Depreciation expense for 2016							$            2,000

2. Journal entry for a
Date	Particulars		Debit	Credit
2016	Depreciation expense	Dr	$3,000
	Accumulated depreciation			$3,000
	(To record depreciation)

Feel free to ask any clarification, if required. Kindly provide feedback by thumbs up, if satisfied. It will be highly appreciated.
Thank you.