Quality Producers acquired factory equipment on 1 January 20X5, costing $156.000
ID: 2546674 • Letter: Q
Question
Quality Producers acquired factory equipment on 1 January 20X5, costing $156.000 Component parts are not significant and need not be recognized and depreciated separately In view of pending technological developments, it is estimated that the machine will have a resale value upon disposal in four years of $32,000 and that disposal costs will be $2,000. The company has a fiscal year-end that ends on 31 December Data relating to the equipment follow Estimated service life Years Service-hours 20,000 Actual operation data Calendar Year 20X5 20x6 20X7 20x8 Service Hours 5,700 5,000 4,800 4,400 Required: 1. Prepare a depreciation schedule for the asset, using a Straight-line depreciation (Enter your answers as positive values. Round your answers to the nearest dollar.) Depreciation Accumulated Expense Depreciation Net Book Value Year Cost 1 January 20x5 31 December 20X5 31 December 20x6 31 December 20X7 31 December 20X8Explanation / Answer
Answer 1-a Depreciation schedule using Straight line depreciation Year Depreciation Expense Accumulated Depreciation Cost Net Book Value 1st Jan.2015 $0 $0 $156,000 $156,000 31st Dec.2015 $31,500 $31,500 $156,000 $124,500 31st Dec.2016 $31,500 $63,000 $156,000 $93,000 31st Dec.2017 $31,500 $94,500 $156,000 $61,500 31st Dec.2018 $31,500 $126,000 $156,000 $30,000 Depreciation per year = (Cost - residual value) / Useful life = ($156000 - $30000) / 4 years = $31,500 Answer 1-b Declining balance depreciation using 40% rate Year Depreciation Expense Accumulated Depreciation Cost Net Book Value 1st Jan.2015 $0 $0 $156,000 $156,000 31st Dec.2015 $62,400 $62,400 $156,000 $93,600 31st Dec.2016 $37,440 $99,840 $156,000 $56,160 31st Dec.2017 $22,464 $122,304 $156,000 $33,696 31st Dec.2018 $13,478 $135,782 $156,000 $20,218 Answer 1-c Service hours depreciation Year Depreciation Expense Accumulated Depreciation Cost Net Book Value 1st Jan.2015 $0 $0 $156,000 $156,000 31st Dec.2015 $35,910 $35,910 $156,000 $120,090 31st Dec.2016 $31,500 $67,410 $156,000 $88,590 31st Dec.2017 $30,240 $97,650 $156,000 $58,350 31st Dec.2018 $27,720 $125,370 $156,000 $30,630 Depreciation per service hour = (cost - residual value)/Total service hours during useful life Depreciation per year = ($156000 - $30000) / 20000 hours = $6.30 per service hour Answer 2 Straight line depreciation as a percentage of original cost = $31500 / $156000 = 20%