On January 1, 2016, SugarBear Company acquired equipment costing $144,200, which

Question

On January 1, 2016, SugarBear Company acquired equipment costing $144,200, which will be depreciated on the assumption that the equipment will be useful for five years and have a residual value of $11,000. The estimated output from this equipment is as follows: 2016-14,000 units; 2017-25,000 units; 2018-29,000 units; 2019-26,000 units; 2020-17,000 units. The company is now considering possible methods of depreciation for this asset. Calculate what the depreciation expense would be for cach year of the asset's life, if the company chooses: i. The straight-line method Straight-line depreciations ii. The units-of-production method (Round "per unit" answer to 2 decimal places, e.g. 15.25.) Units-of-production method depreciations per year per unit 2016s 2017 2018 2019 2020 ii. The double diminishing-balance method (Round answers to the nearest whole dollar, e.g.5,275.) Rate

Explanation / Answer

(i) Straight line depreciation = (144200-11000/5) = 26640 per year

(ii) Depreciation per unit = (144200-11000/111000) = 1.20 per unit

(iii) Straight line rate = 100/5 = 20%

Double decline rate = 20*2 = 40%

so double diminishing balance rate = 40%

Year Depreciation expense 2016 16800 2017 30000 2018 34800 2019 31200 2020 20400

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