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Trouble Company - Depreciation Calculation

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Trouble Company purchased equipment of January 1. 2006, for \$60,000. It is estimated that the equipment will have a \$5,000 salvage value at the end of its 5- year useful life. It is also estimated that the equipment will produce 1000.000 units over is 5-year life.

1. Compute the amount of depreciation expense for the year ended December 31, 2006, using the straight-line method of depreciation.

2. If 16,000 units of product are produced in 2006, and 24,000 units are produced in 2007, what is the book value of the equipment at December 31, 2007? The company uses the units -of-activity depreciation method.

3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2008?

Solution Preview

1. Compute the amount of depreciation expense for the year ended December 31, 2006, using the straight-line method of depreciation.

Straight-line method of depreciation = (Total cost - Salvage value)/Useful life
= (\$60,000 - \$5,000)/5
= \$11,000 per year

2. If 16,000 units of product are produced in 2006, and ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to compute the amount of depreciation expense, book value, and Accumulated Depreciation-Equipment for Trouble Company.

\$2.49