At the beginning of last year, Barrington Corporation purchased a piece of heavy equipment for $ 63,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $ 3,000. Bremond used the equipment for 19,000 hours last year and 23,000 hours this year. Depreciation expense for year two using double-declining-balance (DDB) and units-of-production (UOP) methods would be as follows:

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jepessoa jepessoa · Answer 1 · 2019-11-21T23:41:21+01:00

Answer:

double declining balance depreciation:

$63,000 / 5 years = $12,600 or 20% per year

depreciation expense year 1 = $63,000 x 40% = $25,200

$63,000 - $25,200 = $37,800

depreciation expense year 2 = $37,800 x 40% = $15,120

units of production depreciation:

($63,000 - $3,000) / 100,000 hours = $0.60 per hour

Depreciation expense year 1 = 19,000 hours x $0.60 per hour = $11,400

Depreciation expense year 2 = 23,000 hours x $0.60 per hour = $13,800