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Homework answers / question archive / On January 3, 2020, Xenex Innovations purchased computer equipment for $135,250

On January 3, 2020, Xenex Innovations purchased computer equipment for $135,250

Finance

On January 3, 2020, Xenex Innovations purchased computer equipment for $135,250. The equipment will be used in research and development activities for five years or a total of 9,300 hours and then sold for about $19,000.

 

Assume actual usage in hours of:

 

2020 2021 2022 2023 2024 1,600 1,830 2,900 3,030 3,200 

 

Required:

Calculate depreciation expense and book values for each year of the equipment's life for each method of depreciation using the table provided below. Xenex's year-end is December 31. (Do not round intermediate calculations.)

 

 

 

 

Analysis Component:

Which method will result in the greatest:

 

a. Total assets being reported on the balance sheet in 2020? in 2023?

 

 

 

 

 

b. Operating expenses being reported on the income statement in 2020? in 2023?

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1)

 

Straight-Line Depreciation Schedule                
    Depreciation for the Year            
  Asset Depreciable   Useful Life   Depreciation Accumulated Book
Date Cost Cost       Expense Depreciation Value
01/03/2020 135250              
12/31/2020   116250 / 5 = 23250 23250 112000
12/31/2021   116250 / 5 = 23250 46500 88750
12/31/2022   116250 / 5 = 23250 69750 65500
12/31/2023   116250 / 5 = 23250 93000 42250
12/31/2024   116250 / 5 = 23250 116250 19000
Depreciable cost =135250-19000=116250            

 

Units-of-Production Depreciation Schedule:                
    Depreciation for the Year            
  Asset Depreciation   Number of   Depreciation Accumulated Book
Date Cost Per Unit   Mileage   Expense Depreciation Value
01-03-2020 135250              
12/31/2020   12.5 * 1600 = 20000 20000 115250
12/31/2021   12.5 * 1830 = 22875 42875 92375
12/31/2022   12.5 * 2900 = 36250 79125 56125
12/31/2023         = 37125 116250 19000
12/31/2024         = - 116250 19000
                 
Depreciation per Unit = (Original Cost- Salvage Value)/ Estimated Life                
 =(135250-19000)/9300 Hour=$12.5                

 

Double-Declining-Balance Depreciation Schedule                
    Depreciation for the Year            
  Asset Book   DDB   Depreciation Accumulated Book
Date Cost Value   Rate   Expense Depreciation Value
01-01-2020 135250              
12/31/2020   135250 * 40% = 54100 54100 81150
12/31/2021   81150 * 40% = 32460 86560 48690
12/31/2022   48690 * 40% = 19476 106036 29214
12/31/2023   29214 * 40% = 10214 116250 19000
12/31/2024     *   =     19000
DDB Rate= 1/ Estimated Life * 2= 1/5*2= 40%                
(29214-19000)=10214                

2)


 

Part-a

 Total assets being reported on the balance sheet in 2020 and 2023:

2020 - Units of Production Method

2023 - Straight line Depreciation Method
 
 

Part-b

Operating expenses being reported on the income statement in 2020 and 2023:

2020 - Double Declining Balance Method

2023 - Units of Production Method
 

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