Financial Accounting Fixed Assets & Depreciation

On January 1, 2019, BonJovi Incorporated purchased a $50,000 piece of equipment. The equipment has a 4 year expected useful life and a $10,000 estimated residual value. It is estimated that the equipment will be operated 20,000 hours over its lifetime. In the first year, the equipment actually ran 6,800 hours. In the second year, the equipment was utilized 4,200 hours.

Compute the annual depreciation expense and book value for the first two years of the assets life assuming the use of:

• straight line method
• units of output method
• double declining balance method

Financial statement outlines for each scenario are provided below:

Straight Line Method:

On the Income Statement:

2019 2020

Depreciation Expense

On the Balance Sheet:

Asset
Accumulated Depreciation
Book Value

Units of Output Method:

On the Income Statement:

2019 2020

Depreciation Expense

On the Balance Sheet:

Asset
Accumulated Depreciation
Book Value

Double Declining Balance Method:

On the Income Statement:

2019 2020

Depreciation Expense

On the Balance Sheet:

Asset
Accumulated Depreciation
Book Value