Problem 6-25, Chapter 6. Calculating depreciation expense using four different m
ID: 2350877 • Letter: P
Question
Problem 6-25, Chapter 6. Calculating depreciation expense using four different methods.
O'Brian Service Company purchased a copier on January 1, 2012, for $17,000 and paid an additional $200 for delivery charges. The copier was estimated to have a life of four years or 800,000 copies. Salvage was estimated at $1,200. The copier produced 230,000 copies in 2012 and 250,000 copies in 2013.
Required
Compute the amount of depreciation expense for the copier for calendar years 2012 and 2013, using these methods:
a. Straight-line
b. Units-of-production.
c. Double-declining-balance
check figures:
b. Depreciation expense, 2012: $4,600
c. depreciation expense, 2013: $4,300
Explanation / Answer
a. Straight-line (17,200 – 1,200)/4 = $4,000 per year 2012: $4,000 2013: $4,000 b. Units-of-production. (17,200 – 1,200)/800,000 = 0.02 per copy 2012: 230,000*.02 = $4,600 2013: 250,000*.02 = $5,000 c. Double-declining-balance double declining balance rate is twice straight line rate. Salvage value is not taken into consideration, but the asset is never depreciated below its salvage value. Straight line rate = ¼ = .25. DDB rate = .25*2 = .5 2012: 17,200*.5 = $8,600 2013: 8,600*.5 = $4,300