Use the Dynamic Exhibit to answer the following questions.
1. Fill in depreciation expense in year 3 under each depreciation method when residual value is $30,000 and useful life is 3 years:
| Depreciation method: | |
| Straight-line | 135,000 |
| Units-of-Output | 94,500 |
| Double-declining | 18,237 |
2. Fill in the book value at the end of year 1 under each depreciation method when residual value is $36,000 and useful life is 4 years:
| Depreciation method: | |
| Straight-line | 335,250 |
| Units-of-Output | I NEED THIS ANSWER PLEASE |
| Double-declining | 217,500 |
3. Move the Useful Life slider from 3 years to 4 years and complete the sentence.
Depreciation expense each year under every method is lower when the cost is spread over a longer useful life.
Equipment acquired at the beginning of the year at a cost of $435,000 has an estimated residual value of $36,000 and an estimated useful life of 4 years. The units of output for 4 years is 2,600 hours, 2,300 hours, 1,600 hours, and 1,000 hours, respectively. Determine depreciation expense, accumulated depreciation, and book value using the units-of-output method. Straight-line Units-of-output Double-declining Depreciation Method Move the slider to change the values. $30,000 $36,000 Residual Value Click on to view the information. 3 years 4 years Useful Life View Analysis Units-of-Output Depreciation Method Cost - Residual Value $435,000 - $36,000 Depreciation per Hour = = $53.20 per hour Total Units of Output 7,500 hours Year Depreciation per Unit X Total Units of Output Used Depreciation Expense 1 $53.20 per hour X 2,600 hours $138,320 2 $53.20 per hour X 2,300 hours $122,360 3 $53.20 per hour X 1,600 hours $ 85,120 4 $53.20 per hour 1,000 hours $ 53,200 Year Depreciation Expense Accumulated Depreciation at End of Year Book Value at End of Year $435,000 Initial Cost 1 $138,320 $138,320 296,680 2 122,360 260,680 174,320 3 85,120 345,800 89,200 (i 4 53,200 399,000 36,000 (2 Total $399,000 Equipment acquired at the beginning of the year at a cost of $435,000 has an estimated residual value of $30,000 and an estimated useful life of 3 years. The units of output for 3 years is 2,600 hours, 2,000 hours, and 1,400 hours, respectively. Determine depreciation expense, accumulated depreciation, and book value using the straight-line method. Straight-line Units-of-output Double-declining Depreciation Method Move the slider to change the values. $30,000 $36,000 Residual Value Click on to view the information. 3 years 4 years Useful Life Under the straight-line depreciation method, depreciation expense of $135,000 is determined by dividing the depreciable cost cost minus residual value) by the useful life: ($435,000 - $30,000) + 3 years. Depreciation expense under the straight-line method is the same amount each year. In this scenario depreciation expense is $135,000 each year, accumulated depreciation at the end of year 3 is $405,000 ($135,000 + $135,000 + $135,000), and book value is the asset's residual value, or $30,000. Close Straight-Line Depreciation Method Cost - Residual Value $435,000 $30,000 Depreciation Expense = = $135,000 Useful Life Year Depreciation Expense Accumulated Depreciation at End of Year Book Value at End of Year $435,000 Initial Cost 1 $135,000 $135,000 300,000 2 135,000 270,000 165,000 3 135,000 405,000 30,000 Total $405,000 Equipment acquired at the beginning of the year at a cost of $435,000 has an estimated residual value of $30,000 and an estimated useful life of 3 years. The units of output for 3 years is 2,600 hours, 2,000 hours, and 1,400 hours, respectively. Determine the comparison of depreciable expense using the straight-line method, units-of-output method, and double-declining-balance method. $30,000 $36,000 Move the slider to change the values. Residual Value 3 years 4 years click on to view the information. Useful Life The amount of depreciation expense each year varies with the depreciation method. The straight-line method allocates the same amount of depreciation expense for each year of the asset's useful life. Depreciation expense under the units-of-output method corresponds with the number of units produced. Depreciation expense under the double-declining-balance method depreciates the asset more rapidly than the other methods. That is, the depreciation expense is higher in the early years. The total depreciation expense is the same for all depreciation methods. Close Comparing Depreciation Methods Depreciation Expense Year Straight-Line Method Units-of-Output Method Double-Declining-Balance Method 1 $135,000 $175,500 ($67.50 x 2,600 hrs.) $290,145 ($435,000 x 66.7%) 2 135,000 135,000 ($67.50 x 2,000 hrs.) 96,618 ($144,855 x 66.7%) 3 135,000 94,500 ($67.50 x 1,400 hrs.) 18,237 ($48,237 - $30,000) Total $405,000 $405,000 $405,000
