Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased at a cost of $43,000 on October 1. The equipment has an estimated residual value of $3,000 and an estimated useful life of five years or 20,000 hours.

Assume the equipment was used for 1,000 hours from October 1 to December 31 and the company uses (a) straight-line, (b) double-declining-balance, or (c) units-of-production depreciation

Instructions are listed below.

Explanation:

Giving the following information:

Calculate the amount of depreciation to report during the year ended December 31 for equipment that was purchased for $43,000 on October 1. The equipment has an estimated residual value of $3,000 and an estimated useful life of five years or 20,000 hours.

Assume the equipment was used for 1,000 hours from October 1 to December 31.

A) Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (43,000 - 3,000) / 5=8,000

Year 1 depreciation = 8,000/12*3 = 2,000

B) Annual depreciation = 2*[ (original cost - residual value) / estimated life (years) ]

Year 1 = 16,000/12*3 = 4,000

C) Annual depreciation = [ (original cost - salvage value) / useful life of production in units]*units produced

Annual depreciation = 40,000/20,000 = 2

Year 1 = 2*1000hs = 2,000