Part 2: Caleulation of Depreciation Expense (30 Points) Orchid Lake Company purc
ID: 2569993 • Letter: P
Question
Part 2: Caleulation of Depreciation Expense (30 Points) Orchid Lake Company purchased new equipment for $8,100 on February 1, 2017. Other information is as follows: The equipment had a useful life of 3 years or 11,700 total hours The equipment has a salvage valuc equal to $4,200 at the end of its useful life. Orchid Lake Company uses the calendar year as its fiscal year. Instructions: PLEASE SHOW YOUR WORK a. Compute the depreciation expense for 2017 and 2018 using the straight-line depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018: b. Compute the depreciation expense for 2017 and 2018 using the double-declining- balance depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018: c. The equipment was used for 2,925 total hours in 2017 and for 3,510 total bours in 2018. Compute the depreciation expense for 2017 and 2018 using the units-of- production depreciation method. 2017 2018 Depreciation expense: Computations: 2017: 2018:Explanation / Answer
1. Straight line method
Computation
2017: = (8100 - 4200) / 3 years * 11/12 = $1192
2018: = (8100 - 4200) / 3 years = $1300
2. Double declining balance
Computation:
Straight line depritiation rate = 100 / 3 years = 33.3333%
Double declining depritiation rate = 33.3333 * 2 = 66.6666%
2017; = 8100 * 66.6666% * 11/12 = 5400 * 11 / 12 = $4950
2018 = (8100 - 4950) * 66.6666% = $2100
3. Units of Production depritiation method
Computation:
2017: = (8100 - 4200) * 2925 / 11700 = $975
2018: = (8100 - 4200) * 3510 / 11700 = $1170
2017 2018 Depritiation expenses 1192 1300