Question

Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $56,000 on October 1. The equipment has an estimated residual value of $2,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation. (Do not round intermediate calculations.)

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Purchased at a cost of $56,000 on October 1. The equipment has an estimated residual value of $2,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment was used for 1,000 hours from October 1 to December 31

A) Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (56,000 - 2,000)/5= 10,800

Year 1= 10,800/12*3= $2,700

B) Annual depreciation= 2*[(original cost - residual value)/estimated life (years)]

Annual depreciation=  21,600

Year 1= 21,600/12*3= 5,400

C) Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Year 1= (54,000/20,000)*1000= $2,700