Chapter 11 Operational Assets: Utilization and Impairment

Jackson Company purchased a new piece of equipment on July 1, 2018 at a cost of $36,000. The equipment has an estimated useful life of 10 years and an estimated residual value of $6,000. During its ten-year useful life, the equipment is expected to produce 500,000 units. The equipment actually produced the following number of units: 2018, 25,000; 2019, 84,000; and 2020, 90,000.

(a) Calculate depreciation expense for 2018, 2019, and 2020 assuming Jackson uses straight-line depreciation.

(b) Calculate depreciation expense for 2018, 2019, and 2020 assuming Jackson uses units-of-production depreciation.