I. Denver Co. purchased equipment for $225,000 on 12/1/x1. It is estimated that the equipment will have a useful life of 7 years and a residual value of $5,000. Estimated production is 30,000 units and estimated working hours are 25,000. During the month of December in 20x1, Denver used the equipment for 515 hours and the equipment produced 1,200 units.

Compute depreciation expense under each of the following methods. Denver is on a calendar-year basis ending December 31, and is using the half-month convention.

No Credit if no calculation is shown.

1. Sum-of-the-years' method for 20x2 (1/1/x2 ~ 12/31/x2)
2. Double-declining balance method for 20x3 (1/1/x3 ~ 12/31/x3)
3. Activity method (units of output) for 20x1 (12/1/x1 ~ 12/31/x1)
4. Straight-line for 20x1(12/1/x1 ~ 12/31/x1)

II. Eagle Company purchased a piece of machinery for $75,000 on January 1, 20x1, and has been depreciating the machine using the double-declining-balance method based on a five-year estimated useful life and no salvage value. On January 1, 20x3, Eagle decided to switch to the straight-line method of depreciation. The residual value is still zero and the estimated useful life did not change.

Required:

a) Prepare the appropriate journal entry, if any, to record the accounting change.

b) Prepare the journal entry to record depreciation for 20x3.

III. Huckleberry Company purchased a machine on January 1, 20x1. The machine had a cost of $350,000 with a $10,000 residual value. The estimated useful life of the machine was eight years. On January 1, 20x3, due to technological innovations, the estimated useful life was reduced by two years from the original life and the residual value was reduced by 50%. The company uses straight-line depreciation.

Required:

Prepare the journal entry to record the annual depreciation on December 31, 20x3.