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.)

To prepare a depreciation schedule using the straight-line method, we'll follow these steps:

### Step 1: Calculate Straight-Line Depreciation

The straight-line depreciation formula is:

\[
\text{Depreciation Expense per Year} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life (in years)}}
\]

Where:
- **Cost of Asset** = \$138,700
- **Residual Value** = \$14,500
- **Useful Life** = 4 years

So,

\[
\text{Depreciation Expense per Year} = \frac{138,700 - 14,500}{4} = \frac{124,200}{4} = 31,050
\]

### Step 2: Prorate Depreciation for 2023 (Partial Year)

Since the equipment was purchased on April 22, 2023, the depreciation for 2023 is prorated. From April 22 to December 31 is **8 months**. Therefore, the prorated depreciation for 2023 is calculated as:

\[
\text{Depreciation for 2023} = 31,050 \times \frac{8}{12} = 31,050 \times 0.6667 = 20,700
\]

### Step 3: Prepare the Depreciation Schedule

Now, we can prepare the depreciation schedule for the four-year life of the equipment:

| Year       | Depreciation Expense | Accumulated Depreciation | Book Value at Year-End |
|------------|----------------------|--------------------------|------------------------|
| 2023       | 20,700               | 20,700                   | 118,000                |
| 2024       | 31,050               | 51,750                   | 86,950                 |
| 2025       | 31,050               | 82,800                   | 55,900                 |
| 2026       | 31,050               | 113,850                  | 24,850                 |
| 2027       | 10,350 (Remaining)   | 124,200                  | 14,500 (Residual Value) |

### Explanation:
- **2023 Depreciation**: \$20,700 is calculated based on 8/12 of the annual depreciation.
- **2024-2026 Depreciation**: Full-year depreciation of \$31,050 for each year.
- **2027 Depreciation**: Since we stop depreciating when the book value reaches the residual value of \$14,500, only \$10,350 is needed to reach the residual value.

Would you like further clarifications on any steps or additional details?

---

### Related Questions:
1. How is the straight-line method different from the units-of-production method?
2. What would the depreciation schedule look like if the equipment was purchased in January 2023?
3. How does the residual value impact the depreciation expense?
4. How would the depreciation schedule change if the useful life was extended to 5 years?
5. What are the advantages of using the straight-line method over other methods?

### Tip:
When calculating depreciation, always consider whether the asset is used for a full year or part of the year. Prorating for partial periods is a key step in accurate financial reporting.

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.

Learn how to prepare a depreciation schedule using the straight-line method for equipment purchased on April 22, 2023. The equipment cost $138,700 with a residual value of $14,500 and a four-year useful life. Includes a prorated depreciation calculation for partial-year usage and a detailed depreciation schedule.

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