Reference no: EM133165382
Question - Cullumber Company purchased equipment on account on September 3, 2019, at an invoice price of $204,000. On September 4, 2019, it paid $5,700 for delivery of the equipment. A one-year, $2,015 insurance policy on the equipment was purchased on September 6, 2019. On September 20, 2019, Cullumber paid $2,300 for installation and testing of the equipment. The equipment was ready for use on October 1, 2019.
Cullumber estimates that the equipment's useful life will be four years, with a residual value of $18,000. It also estimates that, in terms of activity, the equipment's useful life will be 77,600 units. Cullumber has a September 30 fiscal year end. Assume that actual usage is as follows:
|
# of Units
|
Year Ended September 30
|
|
15,640
|
2020
|
|
23,940
|
2021
|
|
20,240
|
2022
|
|
18,680
|
2023
|
Required -
1. Determine the cost of the equipment.
2. Prepare depreciation schedules for the life of the asset under the following depreciation methods:
1. STRAIGHT-LINE DEPRECIATION
2. DOUBLE DIMINISHING-BALANCE DEPRECIATION
3. UNITS-OF-PRODUCTION
3. Which method would result in the highest profit for the year ended September 30, 2021? Over the life of the asset?