Tamarisk Company purchased equipment for $228,000 on October 1, 2020. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 36,000 units and estimated working hours are 20,000. During 2020, Tamarisk uses the equipment for 550 hours and the equipment produces 1,100 units. Compute depreciation expense under each of the following methods. Tamarisk is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, eg. 5.35 and final answers to 0 decimal places, e.g. 45,892) (a) Straight-line method for 2020 $ (b) Activity method (units of output) for 2020 $ (c) Activity method (working hours) for 2020 $ (d) Sum-of-the-years-digits method for 2022 $ (e) Double-declining-balance method for 2021

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racheljones5180 racheljones5180

13-12-2022
Business

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Tamarisk Company purchased equipment for $228,000 on October 1, 2020. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 36,000 units and estimated working hours are 20,000. During 2020, Tamarisk uses the equipment for 550 hours and the equipment produces 1,100 units. Compute depreciation expense under each of the following methods. Tamarisk is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, eg. 5.35 and final answers to 0 decimal places, e.g. 45,892) (a) Straight-line method for 2020 $ (b) Activity method (units of output) for 2020 $ (c) Activity method (working hours) for 2020 $ (d) Sum-of-the-years-digits method for 2022 $ (e) Double-declining-balance method for 2021

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SonaDas SonaDas · Answer 1 · 2022-12-20T20:13:38+01:00

a) Straight line method = (228000-12000/8) × 3/12 = 6750. Thus the depreciation expense of Tamarisk Company by using Straight-line method for 2020 is 6750

Describe double declining balance.

A method of accounting known as the double declining balance (DDB) depreciation method entails double the rate of depreciation for some assets compared to straight-line depreciation. As a result, depreciation rises the most during the first year of ownership before falling over time. When you buy assets that depreciate more quickly in their initial years, you should employ double declining balance depreciation. A GAAP-approved method for discounting the value of equipment as it ages is double-declining depreciation, which is described as an accelerated method of depreciation. A tangible asset is depreciated at a rate that is double the rate of straight-line depreciation.

b) Activity method = (228000-12000/36000) × 1100 = 6600

c) Activity method = (228000-12000/20000) × 550 = 5940

d) Sum of year digit

= 216000 × 7/36 × 9/12 + 216000 × 6/36 × 3/12 = 40500

e) Double decline balance

= 228000 × 25% × 9/12+228000 × 75% × 25% × 3/12 = 53438

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