ACC 321: Accounting as a Management Tool

Chapter 10 Homework Depreciation

You may need to attach separate paperwork to show your answer to each question.

Question: On January 1, 2022, Jon Stark purchased equipment at a cost of $350,000. The equipment should remain in service for four years and have a residual value of $80,000. Before placing the equipment into service on 1/1/22, Stark incurred costs of $20,000 to prepare the equipment for use including testing and installation costs.

The equipments useful life in machine hours is 980,000. Machine hours expected to be used are as follows (notice the hours add up to 980,000):

• 165,000 hours for 2022
• 211,000 hours for 2023
• 263,000 hours for 2024
• 341,000 hours for 2025

In deciding which depreciation method to use, you are asked to provide a depreciation schedule for the straight-line and units-of-production methods.

Required: Prepare a depreciation schedule for the two depreciation methods showing asset cost, depreciation expense, accumulated depreciation, and asset book value. (See Exhibit 10-5 and Exhibit 10-6 for examples of depreciation schedules.)