Reference no: EM132326622
Comparing Three Depreciation Methods
Waylander Coatings Company purchased waterproofing equipment on January 6 for $630,000. The equipment was expected to have a useful life of four years, or 6,800 operating hours, and a residual value of $52,000. The equipment was used for 2,600 hours during Year 1, 2,100 hours in Year 2, 1,200 hours in Year 3, and 900 hours in Year 4.
Required:
1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method.
2. What method yields the highest depreciation expense for Year 1?
3. What method yields the most depreciation over the four-year life of the equipment?
Equipment acquired on January 6 at a cost of 5434,700, has an estimated useful life of 9 years and an estimated residual value of $56,700.
4 a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?
b. What was the hook value of the equipment on January 1 of Year 4?
c. Assuming that the equipment was sold on January 3 of Year 4 for $293,300, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
d. Assuming that the equipment had been sold on January 3 of Year 4 for $314,900 instead of $293,300, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
5. Entries for Sale of Fixed Asset
Equipment acquired on January 5 at a cost of $134,550, has an estimated useful life of 16 years, has an estimated residual value of $9,750, and is depreciated by the straight-line method.
a. What was the book value of the equipment at December 31 the end of the fourth year?
b. Assuming that the equipment was sold on April 1 of the fifth year for 96,395.
1. Journalize the entry to record depreciation for the three months until the sale date. Round your answers to the nerest whole dollar if required.
2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations.
6. Depreciation by Two Methods
A storage tank acquired at the beginning of the fiscal year at a cost of $115,200 has an estimated residual value of $7,000 and an estimated useful life of five years.
a. Determine the amount of annual depreciation by the straight-line method.
b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar.