Instructions (This is all part of one question, please answer the following.) Mo
ID: 2460581 • Letter: I
Question
Instructions (This is all part of one question, please answer the following.)
Monte's Coffee Company purchased packaging equipment on January 5, 2014, for $86,900. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,900. The equipment was used for 8,640 hours during 2014, 6,710 hours in 2015, and 4,650 hours in 2016. Required: 1. Determine the amount of depreciation expense for the years ended December 31, 2014, 2015, and 2016 by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the three years by each method. (Note: For STRAIGHT-LINE ONLY, round each year to the nearest whole dollar and round the last year of depreciation as necessary. For DECLINING BALANCE ONLY,round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.) double-dedining-balance method. Ao ene 2. What method yields the highest depreciation expense for 2014? 3. What method yields the most depreciation over the three-year life of the equipment?Explanation / Answer
2.
Units of output method
3.
All three depreciation methods
Depreciation under SL Method Initial Cost 86900 Less: Salvage Value -6900 Cost of the matchine for depreciation 80000 Depreciation (80,000/3) 26667 Depreciation under Units of Output Method Year Hours used Depreciation 1 8640 $80,000/20,000*8,640 = $34,560 2 6710 $80,000/20,000*6,710 = $26,840 3 4650 $80,000/20,000*4,650 = $18,600 Depreciation under DDB Method Year - a Net Book value, beginning of year - b Double declained depreciation - c = b/Life of assets*2 Net book value, End of the year - d = b-c 1 86,900 57,933 28,967 2 28,967 19,311 9,656 3 9,656 2,756 6,900