On April 22, 2023, Sandhill Enterprises purchased equipment for $138,700. The company expects to use the equipment for 11,500 working hours during its four-year life and that it will have a residual value of $14,500. Sandhill has a December 31 year end and prorates depreciation to the nearest month. The actual machine usage was: 1,500 hours in 2023; 3,000 hours in 2024; 3,600 hours in

2025; 2,600 hours in 2026; and 1,000 hours in 2027.

(a1)

Prepare a depreciation schedule for the life of the asset under the straight-line method. (Round partial-period depreciation rate to 4 decimal palces, e.g. 15.2563% and other answers to 0 decimal places, e.g. 5,276.)

Depreciable

Amount

x

Depr.

Rate

Year

2023

2024

Depr.

Expense

Accum. [ Year

Depr.

Expense

Accum. Depr.

Carrying

Amount

To prepare a depreciation schedule for the life of the asset under the **straight-line method**, we need to follow these steps:

### Step 1: Determine Depreciable Amount
- **Cost of the equipment**: $138,700
- **Residual value**: $14,500
- **Depreciable amount**: $ 138,700 - 14,500 = 124,200 $

### Step 2: Calculate the Straight-Line Depreciation Rate
- **Useful life**: 4 years (as given)
  
The depreciation rate per year is calculated as:

\[
\text{Annual depreciation expense} = \frac{\text{Depreciable amount}}{\text{Useful life}} = \frac{124,200}{4} = 31,050 \, \text{per year}
\]

However, since the equipment was purchased on **April 22, 2023**, the depreciation for 2023 will be prorated based on the months used.

- From **April 22, 2023 to December 31, 2023**, the equipment is used for **8 months**. The partial depreciation for 2023 will be:

\[
\text{2023 Depreciation} = 31,050 \times \frac{8}{12} = 20,700
\]

### Step 3: Prepare the Depreciation Schedule

| Year  | Depreciation Expense | Accumulated Depreciation | Carrying Amount |
|-------|----------------------|--------------------------|-----------------|
| 2023  | 20,700               | 20,700                   | $138,700 - 20,700 = 118,000$ |
| 2024  | 31,050               | 20,700 + 31,050 = 51,750 | $138,700 - 51,750 = 86,950$ |
| 2025  | 31,050               | 51,750 + 31,050 = 82,800 | $138,700 - 82,800 = 55,900$ |
| 2026  | 31,050               | 82,800 + 31,050 = 113,850| $138,700 - 113,850 = 24,850$|
| 2027  | 10,350 (final year)   | 113,850 + 10,350 = 124,200 | $138,700 - 124,200 = 14,500$ (Residual Value) |

### Summary:
- **Depreciable amount**: $124,200
- **Annual depreciation rate**: $31,050 (except prorated for 2023 and 2027)
- The **carrying amount** at the end of the asset's life will be the **residual value of $14,500**.

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Would you like further details on any part of this calculation?

Here are 5 questions to deepen understanding:
1. How is depreciation prorated when an asset is purchased mid-year?
2. What are the differences between straight-line and usage-based depreciation?
3. How would salvage value affect depreciation in other methods?
4. Why does the accumulated depreciation increase each year?
5. What happens to depreciation after the asset reaches its residual value?

**Tip**: Always check the purchase date of an asset to accurately calculate the depreciation for the first and last years!

On April 22, 2023, Sandhill Enterprises purchased equipment for $138,700. The company expects to use the equipment for 11,500 working hours during its four-year life and that it will have a residual value of $14,500. Sandhill has a December 31 year end and prorates depreciation to the nearest month. The actual machine usage was: 1,500 hours in 2023; 3,000 hours in 2024; 3,600 hours in 2025; 2,600 hours in 2026; and 1,000 hours in 2027. Prepare a depreciation schedule for the life of the asset under the straight-line method. (Round partial-period depreciation rate to 4 decimal places, e.g. 15.2563% and other answers to 0 decimal places, e.g. 5,276.)

Learn how to prepare a depreciation schedule for Sandhill Enterprises' equipment purchased in 2023 using the straight-line method. This includes key depreciation formulas, prorated for partial-year usage. Ideal for students in Grades 11-12 or college-level accounting and finance courses.

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