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Question 2: Calculating depreciation amounts by three methods SydMel Fried Chicken bought equipment on 2 January 2021 for $69000. The equipment was expected to remain in service for four years and to perform 22000 fry jobs. At the end of the equipments useful life, SydMel estimates that its residual value will be $9000. The equipment performed 2200 jobs in the first year, 6600 in the second year, 8800 in the third year and 4400 in the fourth year. Requirements: Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under reducing-balance depreciation using 2 times the straight-line rate, Poppys switched to the straight-line method. Show your calculations. Note:Three depreciation schedules must be prepared. Which method tracks the wear and tear on the equipment most closely? Question 2: Calculating depreciation amounts by three methods SydMel Fried Chicken bought equipment on 2 January 2021 for $69000. The equipment was expected to remain in service for four years and to perform 22000 fry jobs. At the end of the equipments useful life, SydMel estimates that its residual value will be $9000. The equipment performed 2200 jobs in the first year, 6600 in the second year, 8800 in the third year and 4400 in the fourth year. Requirements: Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under reducing-balance depreciation using 2 times the straight-line rate, Poppys switched to the straight-line method. Show your calculations. Note:Three depreciation schedules must be prepared. Which method tracks the wear and tear on the equipment most closely?

Answer

Requirement 1

Straight-line depreciation schedule
Depreciation for the year
Date	Asset cost	Depreciable cost	Depreciable rate =		Depreciation expense	Accumulated depreciation	Book value
2 Jan 2021	$						$
31 Dec 2021		$		$		$	$
31 Dec 2022		$		$		$	$
31 Dec 2023		$		$		$	$
31 Dec 2024		$		$		$	RV = $

Asset cost: $xx

Depreciable cost: $ xx $xx = $xx

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Answer (continued)

Requirement 1 (continued)

Units-of-production depreciation schedule
		Depreciation for the year
Date	Asset cost	Depreciation per unit	Number of units/year =	Depreciation expense	Accumulated depreciation	Book value
2 Jan 2021	$xx					$xx
31 Dec 2021		$xx	xx	$xx	$xx	$xx
31 Dec 2022		$xx	xx	$xx	$xx	$xx
31 Dec 2023		$xx	xx	$xx	$xx	$xx
31 Dec 2024		$xx	xx	$xx	$xx	RV = $xx

Depreciation per unit (job): ($xx $xx) / xx jobs = $xx per unit (job)

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Answer (continued)

Requirement 1 (continued)

Reducing balance: 2 times SL rate depreciation schedule
Depreciation for the year
Date	Asset cost	Depreciation cost	Depreciable rate =	Depreciation expense	Accumulated depreciation	Book value
2 Jan 2021	$xx					$69,000
31 Dec 2021	RB	$xx	2/4 x 12/12	$xx	$xx	$xx
31 Dec 2022	RB	$xx	2/4 x 12/12	$xx	$xx	$xx
31 Dec 2023	SL	*$8,250	**$8,250	$xx	$xx	$xx
31 Dec 2024	SL	*$xx	$8,250	$xx	$xx	RV = $9,000
				$60,000

* Depreciable cost for 2023 and 2024 after changing to SL method: $69,000 Accumulated depreciation of $51,750 RV $9,000 = $8,250

Requirement 2

The units-of-production method tracks wear and tear most closely.

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