On january 1, 2021, canseco plumbing fixtures purchased equipment for $44,000. residual value at the end of an estimated four-year service life is expected to be $8,000. the company expects the equipment to operate for 20,000 hours. the equipment operated for 2,900 and 3,700 hours in 2021 and 2022, respectively. required: a. calculate depreciation expense for 2021 and 2022 using straight line method. b. calculate depreciation expense for 2021 and 2022 using double-declining balance method. c. calculate depreciation expense for 2021 and 2022 using units-of-production using hours operated.

a.

Depreciation expense for 2021: $9,000

Depreciation expense for 2022: $9,000

b.

Depreciation expense for 2021: $18,000

Depreciation expense for 2022: $9,000

c.

Depreciation expense for 2021: $5,220

Depreciation expense for 2022: $6,660

Explanation:

a. Canseco Plumbing Fixtures uses Straight-line method

Annual Depreciation Expense = (Cost of asset − Residual value Value)/Useful Life = ($44,000 - $8,000)/4 = $9,000

Depreciation expense for 2021: $9,000

Depreciation expense for 2022: $9,000

b. Canseco Plumbing Fixtures uses Double-declining-balance method

Under the straight-line method, useful life is 4 years, so the equipment's annual depreciation will be 25% of the Depreciable cost.

Depreciable cost = Total asset cost - Residual value =  $44,000-$8,000 = $36,000

Under the double-declining-balance method the 25% straight line rate is doubled to 50% - multiplied times the Depreciable cost's book value at the beginning of the year.

In 2021, depreciation expense = 50% x $36,000  = $18,000

At the beginning 2022, the Depreciable cost's book value is $36,000-$18,000 = $18,000

Depreciation expense in 2022 = 50% x $18,000 = $9,000

c. Canseco Plumbing Fixtures uses Units-of-activity method

The Units-of-activity depreciation method is calculated by using the following formula:

Depreciation Expense = [(Cost of asset − Residual value)/Life in Number of hours Operated]x Number of hours Operated] = Depreciation Expense per hour x Number of hours Operated

Depreciation Expense per hour = ($44,000-$8,000)/20,000 = $1.8

Depreciation expense each year = Actual hours Operated x Depreciation Expense per hour.

Depreciation expense for 2021 = 2,900 x $1.8 = $5,220

Depreciation expense for 2022 = 3,700 x $1.8 = $6,660

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