On January 1, 2011, the Peninsula Paper Company purchased ...

[SAVANNAHHOOPER23]

On January 1, 2011, the Peninsula Paper Company purchased manufacturing equipment for 600,000. The equipment has a 4-year estimated useful life and a salvage value of 22,500. The company expects to use the equipment for 275,000 hours.
 
  Actual hours the equipment was used are provided in the table below:
 
  Year Hours
  2011 40,000
  2012 95,000
  2013 80,000
  2014 60,000
 
  Required: Calculate the depreciation expense for each year of the asset's life using:
  1. the straight-line method,
  2. the double-declining balance method, and
  3. the activity (units-of-production) method.

Question 2

All bank memos reported on the bank reconciliation require entries in the company's accounts.
 a. True
  b. False
 
   Indicate whether the statement is true or false

[nguyenhoanhat]

Answer to Question 1

1. Straight-line method
Year Depreciation expense
2011 144,375 = (600,000 - 22,500) / 4 years
2012 144,375
2013 144,375
2014 144,375

2. Double-declining balance method
Year Depreciation expense
2011 300,000 = (2/4) x 600,000
2012 150,000 = (2/4) x 300,000
2013  75,000 = (2/4) x 150,000
2014  52,500 = 75,000 book value - 22,500 salvage value

3. The activity (units-of-production) method
(600,000  22,500) / 275,000 hours = 2.10 per hour
Year Depreciation expense
2011 84,000 = 40,000 hours  2.10
2012 199,500 = 95,000 hours  2.10
2013 168,000 = 80,000 hours  2.10
2014 126,000 = 60,000 hours  2.10

Answer to Question 2

True