BUSN 181 July 17, 2019 PR 9-3A Depreciation by three methods; partial years Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2,4,000 hours in Year 3, and 1,000 hours in Year 4. Instructions 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-activity method, and (C) the double-declining-balance method. PR 9-44 Depreciation by two methods; sale of fixed asset New lithographic equipment, acquired at a cost of $800,000 on March 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. In the first week of the fifth year, on March 4, the equipment was sold for $135,000. Instructions 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (A) the straight-line method and (B) the double-declining-balance method. 2. Journalize the entry to record the sale assuming the manager chose the double- declining-balance method. 3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $88,750 instead of $135,000. Word 266 19 Spell Check D Bm D Sedia SetValue in Row 10 Column 13 A. Straight- Line Depreciation Expense B. Units of- Activity C. Double-Declining- Balance Year 1 2 3 4 Totals Calculations: Straight-line method: For full year: (Cost Residual Value) 1 Years Yearly Depreciation For part years: Year 1 Depreciation x Portion of Year Depreciation Depreciation Year 4 Depreciation x Portion of Year Units of activity method: (Cost Residual Value) Total Hours Rate Rate Hours Yearly Depreciation Year 1 Year 2 Year 3 Year 4 Yearly Depreciation Double-declining-balance method: Depreciable Balance Rate Portion of Year - Year 1 Year 2 Year 3 Since depreciation cannot cause book value to fall below residual value: Depreciable Residual Balance Value Yearly Depreciation Year 4