Question

At the beginning of 2017, your company buys a $30,400 piece of equipment that it expects to use for 4 years. The equipment has an estimated residual value of 4,000. The company expects to produce a total of 200,000 units. Actual production is as follows: 41,000 units in 2017, 49,000 units in 2018, 45,000 units in 2019, and 65,000 units in 2020. Required: a. Determine the depreciable cost. b. Calculate the depreciation expense per year under the straight line method c. Use the straight-line method to prepare a depreciation schedule. d. Calculate the depreciation rate per unit under the units of production method e. Use the units of production method to prepare a depreciation schedule. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Determine the depreciable cost. Deprecable Cost

Answer 1

a.
Depreciable cost = Acquisition cost - Estimated residual value = 30400 - 4000	26400

b.
Depreciation expense per year = Depreciable cost / Estimated useful life in years = 26400 / 4	6600

c.
Year	Depreciation expense	Accumulated depreciation	Net book value
Acquisition			30400
2017	6600	6600	23800
2018	6600	13200	17200
2019	6600	19800	10600
2020	6600	26400	4000

d.
Depreciation rate per unit = Depreciable cost / Estimated production in units = 26400 / 200000	0.132

e.
Year	Depreciation expense	Accumulated depreciation	Net book value
Acquisition			30400
2017	5412 [ 0.132 * 41000 ]	5412	24988
2018	6468 [ 0.132 * 49000 ]	11880	18520
2019	5940 [ 0.132 * 45000 ]	17820	12580
2020	8580 [ 0.132 * 65000 ]	26400	4000