Monte’s Coffee Company purchased packaging equipment on January 5, 2014, for $98
ID: 2487399 • Letter: M
Question
Monte’s Coffee Company purchased packaging equipment on January 5, 2014, for $98,000. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,000. The equipment was used for 8,980 hours during 2014, 6,930 hours in 2015, and 4,090 hours in 2016.
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.)
Depreciation Expense
1
Year
Straight-Line Method
Units-of-Output Method
Double-Declining-Balance Method
2
2014
3
2015
4
2016
5
Total
2. What method yields the highest depreciation expense for 2014?
Straight-line method
Units-of-output method
Double-declining-balance method
All three depreciation methods
3. What method yields the most depreciation over the three-year life of the equipment?
Straight-line method
Units-of-output method
Double-declining-balance method
All three depreciation methods
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.) 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
Ans 1 Straight line Depreciation (98000-6000)/3 30667 Year Depreciation 2014 30667 2015 30667 2016 30667 92000 Un its of output method Depreciation per unit Cost-salvage value/Total No. of hours 92000/20000 4.6 per hour Year Hours used Dep. Per hour Depreciation 2014 8980 4.6 41308 2015 6930 4.6 31878 2016 4090 4.6 18814 Total 92000 Double Declining Method Beginning Book Value*Straight line Depreciation Rate*200% SLM rate 100/3 33.3333 Year Beginning Book value B Dep B*200%*33.3333% Ending book value 2014 98000 65333 32667 2015 32667 21778 10889 2016 10889 7259 3630 Total 94370 Depreciation Expense 1 Year Straight-Line Method Units-of-Output Method Double-Declining-Balance Method 2 2014 30667 41308 65333 3 2015 30667 31878 21778 4 2016 30667 18814 7259 5 Total 92000 92000 94370 Ans 2 Double Declining method yields highest depreciation $65333 for 2014 Ans 3 Double Declining method yields highest depreciation $94370