Assignment Exercise 85: Depreciation Computation: Units-of-Service

Study the Units of Service portion of the chapter closely.

Required

Using the format in Table 8A-5, compute units of service depreciation using the following assumptions:

Cost to be depreciated = $50,000

Salvage value = zero

Total units of service = 10,000

Units of service per year: Year 1 = 2,200; Year 2 = 2,100; Year 3 = 2,300; Year 4 = 2,200; Year 5 = 200

Using the same format, compute units of service depreciation using adjusted assumptions as follows:

Cost to be depreciated = $50,000

Salvage value = $5,000

Total units of service = 10,000

Units of service per year: Year 1 = 2,200; Year 2 = 2,100; Year 3 = 2,300; Year 4 = 2,200; Year 5 = 200

Table 8-A5 Units of Service (Units of Production) Depreciation: 5-Years of Service with No Salvage Value

Depreciation Computation

Cost (to Be Units of X Depreciation = Annual Accumulated Depreciation Net Remaining

Depreciated) Service per per unit Depreciation Reserve for Depreciation) Undepreciated Cost

Year Expense (Net Book Value)

$10,000

year $1,000 $2,00* $2,000 $2,000 $8,000

1

Year 900 2,00 1,800 3,800 6,200

2

Year 800 2,00 1,600 5,400 4,600

3

Year 1,100 2,00 2,200 7,000 2,400

4

Year 1,200 2,00 2,400 10,000 -0-

5

Total Units 5,000

*$10,000 divided by total units (5,000) equals depreciation per unit of $2.00.

Units of Service in Year 2 total 900. Thus 900 units times $2.00 per unit equals $1,800 Year 2 depreciation.

The computation continues in this manner until the total 5,000 units of service are exhausted. The equipment is then fully depreciated.