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Blueprint Connection: Depreciation Methods

Depreciation is the process of allocating the cost of an asset to expense over the asset's estimated useful life. The amount depreciated is the cost of the asset less the asset's expected residual value.

depreciation method allocates larger amounts of depreciation expense to earlier periods of an assets life and smaller amounts of depreciation expense to later periods of an assets life. depreciation allocates an equal amount of the assets cost to depreciation expense for each year of the assets useful life. depreciation is used primarily to depreciate machinery and allocates costs based on the actual use of the machine to produce product. While these methods allocate a different amount of depreciation expense to each year of an assets life, the total amount of depreciation expense recognized over the assets life is the same under either method.

Select the depreciation method that matches the depreciation formula.

Depreciation Formula	Depreciation Method
(Cost - Residual Value) / Useful Life
(1 / Useful Life) 2 Book Value
(Cost - Residual Value) / Total Units of Production Number of units produced in the period

On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $83,000. The equipment is expected to have a useful life of four years or produce a total of 123,000 units. At the end of its life, the equipment is expected to have a residual value of $5,500. The equipment is expected to produce 27,060 units in 2014; 31,980 units in 2015; 31,980 units in 2016; and 31,980 units in 2017. Courier Inc.'s fiscal year ends on December 31.

In the table below, fill in the missing depreciation expense and accumulated depreciation amounts using the straight-line, double-declining-balance, and units-of-production methods. Do not round your intermediate calculation. When required, round your answers to the nearest dollar.

Cost $83,000	Depreciation Expense			Accumulated Depreciation
Year	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method	Straight-line Method	Double- Declining- Balance Method	Unit-of- Production Method
2014	$fill in the blank beeb310a8f93065_1	$41,500	$17,050	$19,375	$41,500	$17,050
2015	$19,375	$fill in the blank beeb310a8f93065_2	$20,150	$fill in the blank beeb310a8f93065_3	$62,250	$37,200
2016	$19,375	$10,375	$fill in the blank beeb310a8f93065_4	$58,125	$fill in the blank beeb310a8f93065_5	$57,350
2017	$19,375	$4,875	$20,150	$77,500	$77,500	$fill in the blank beeb310a8f93065_6

As new or additional information becomes available, a company will need to recalculate its depreciation expense based on current estimates of useful life and/or residual value and

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