QUESTION 1 Amortization Methods (20 Marks)

Micro Circuit Company purchased new equipment on January 1, 2017, at a cost of $80,000. Useful life of this equipment was estimated at 4 years, with an estimated residual value of $5,000 and estimated production of 150,000 units. The actual units produced by the equipment would be:

2017 15,000 units

2018 40,000 units

2019 35,000 units

2020 37,500 units

2021 22,500 units

Required:

Compute the annual depreciation expense for each year until this equipment becomes fully depreciated under each of the following methods listed below. Show all supporting computations for full marks.

1. Straight-line.
2. Units-of-production method
3. Double-Declining-Balance.

2. Indicate what the book value of the equipment would be under each method at the end of 2019.