{"id":203515,"date":"2025-03-20T02:43:28","date_gmt":"2025-03-20T02:43:28","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=203515"},"modified":"2025-03-20T02:43:31","modified_gmt":"2025-03-20T02:43:31","slug":"taco-hut-purchased-equipment-on-may-1-2012-for-15000","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/20\/taco-hut-purchased-equipment-on-may-1-2012-for-15000\/","title":{"rendered":".Taco Hut purchased equipment on May 1, 2012, for $15,000"},"content":{"rendered":"\n

140.Taco Hut purchased equipment on May 1, 2012, for $15,000. Residual value at the end of an estimated 8 year service life is expected to be $3,000. Calculate depreciation expense using the straight-line method for 2012 and 2013, assuming a December 31 year-end.<\/p>\n\n\n\n

141.China Dragon purchased new restaurant equipment on September 1, 2012, for $8,000. Residual value at the end of an estimated 5 year service life is expected to be $2,000. Calculate depreciation expense using the straight-line method for 2012 and 2013, assuming a December 31 year-end.<\/p>\n\n\n\n

142.Stephan&#39;s Resorts purchased equipment for $40,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The machine operated for 2,200 hours in the first year and the company expects the machine to operate for a total of 10,000 hours over its four year life. Calculate depreciation expense for the first year using each of the following depreciation methods: (1) straight-line, (2) double-declining-balance, and (3) activity-based.<\/p>\n\n\n\n

143.Chubbyville purchases a delivery van for $23,500. Chubbyville estimates that at the end of its four-year service life, the van will be worth $2,500. During the four-year period, the company expects to drive the van 105,000 miles. Calculate annual depreciation for the four-year life of the van using each of the following methods. Round all amounts to the nearest dollar.

1. Straight line.
2. Double-declining-balance.
3. Activity-based.

Actual miles driven each year were 24,000 miles in Year 1; 26,000 miles in Year 2; 22,000 miles in Year 3; and 25,000 miles in Year 4. Note that actual total miles of 97,000 fall short of expectations by 8,000 miles.<\/p>\n\n\n\n

The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Let’s break down the problems one by one.<\/p>\n\n\n\n

140. Taco Hut (Straight-Line Depreciation)<\/strong><\/h3>\n\n\n\n

Formula for Straight-Line Depreciation<\/strong>: Depreciation Expense=Cost of Equipment\u2212Residual ValueUseful Life\\text{Depreciation Expense} = \\frac{\\text{Cost of Equipment} – \\text{Residual Value}}{\\text{Useful Life}}<\/p>\n\n\n\n

Given:<\/strong><\/p>\n\n\n\n

    \n
  • Cost of Equipment = $15,000<\/li>\n\n\n\n
  • Residual Value = $3,000<\/li>\n\n\n\n
  • Useful Life = 8 years<\/li>\n\n\n\n
  • Year-end = December 31<\/li>\n<\/ul>\n\n\n\n

    Straight-Line Depreciation Calculation:<\/strong> Depreciation Expense per Year=15,000\u22123,0008=12,0008=1,500\\text{Depreciation Expense per Year} = \\frac{15,000 – 3,000}{8} = \\frac{12,000}{8} = 1,500<\/p>\n\n\n\n

    Now, since Taco Hut purchased the equipment on May 1, 2012, we need to account for only part of the year in 2012 (May to December).<\/p>\n\n\n\n

    Depreciation for 2012<\/strong>: Since the equipment was used for 8 months (May to December), the depreciation expense for 2012 would be: Depreciation for 2012=1,500\u00d7812=1,000\\text{Depreciation for 2012} = 1,500 \\times \\frac{8}{12} = 1,000<\/p>\n\n\n\n

    Depreciation for 2013<\/strong>: Since it’s a full year, the depreciation expense will be the full $1,500.<\/p>\n\n\n\n

    Answers<\/strong>:<\/p>\n\n\n\n

      \n
    • Depreciation for 2012 = $1,000<\/strong><\/li>\n\n\n\n
    • Depreciation for 2013 = $1,500<\/strong><\/li>\n<\/ul>\n\n\n\n
      \n\n\n\n

      141. China Dragon (Straight-Line Depreciation)<\/strong><\/h3>\n\n\n\n

      Given:<\/strong><\/p>\n\n\n\n

        \n
      • Cost of Equipment = $8,000<\/li>\n\n\n\n
      • Residual Value = $2,000<\/li>\n\n\n\n
      • Useful Life = 5 years<\/li>\n\n\n\n
      • Purchase Date = September 1, 2012<\/li>\n<\/ul>\n\n\n\n

        Straight-Line Depreciation Calculation:<\/strong> Depreciation Expense per Year=8,000\u22122,0005=6,0005=1,200\\text{Depreciation Expense per Year} = \\frac{8,000 – 2,000}{5} = \\frac{6,000}{5} = 1,200<\/p>\n\n\n\n

        Since China Dragon purchased the equipment on September 1, 2012, the depreciation for 2012 will be for 4 months (September to December).<\/p>\n\n\n\n

        Depreciation for 2012<\/strong>: Depreciation for 2012=1,200\u00d7412=400\\text{Depreciation for 2012} = 1,200 \\times \\frac{4}{12} = 400<\/p>\n\n\n\n

        Depreciation for 2013<\/strong>: Since it’s a full year, the depreciation will be the full $1,200.<\/p>\n\n\n\n

        Answers<\/strong>:<\/p>\n\n\n\n

          \n
        • Depreciation for 2012 = $400<\/strong><\/li>\n\n\n\n
        • Depreciation for 2013 = $1,200<\/strong><\/li>\n<\/ul>\n\n\n\n
          \n\n\n\n

          142. Stephan’s Resorts (Multiple Depreciation Methods)<\/strong><\/h3>\n\n\n\n

          Given:<\/strong><\/p>\n\n\n\n

            \n
          • Cost of Equipment = $40,000<\/li>\n\n\n\n
          • Residual Value = $8,000<\/li>\n\n\n\n
          • Useful Life = 4 years<\/li>\n\n\n\n
          • Hours in Year 1 = 2,200 hours<\/li>\n\n\n\n
          • Total expected hours = 10,000 hours<\/li>\n<\/ul>\n\n\n\n

            (1) Straight-Line Depreciation:<\/strong><\/h4>\n\n\n\n

            Depreciation Expense per Year=40,000\u22128,0004=32,0004=8,000\\text{Depreciation Expense per Year} = \\frac{40,000 – 8,000}{4} = \\frac{32,000}{4} = 8,000<\/p>\n\n\n\n

            Depreciation for Year 1 = $8,000<\/strong><\/p>\n\n\n\n

            (2) Double-Declining-Balance Depreciation:<\/strong><\/h4>\n\n\n\n

            Double-Declining Rate = 24=50%\\frac{2}{4} = 50\\%<\/p>\n\n\n\n

            Depreciation for Year 1 = 40,000\u00d750%=20,00040,000 \\times 50\\% = 20,000<\/p>\n\n\n\n

            (3) Activity-Based Depreciation:<\/strong><\/h4>\n\n\n\n

            Depreciation per Hour=40,000\u22128,00010,000=32,00010,000=3.20 per hour\\text{Depreciation per Hour} = \\frac{40,000 – 8,000}{10,000} = \\frac{32,000}{10,000} = 3.20 \\text{ per hour}<\/p>\n\n\n\n

            Depreciation for Year 1 = 2,200\u00d73.20=7,0402,200 \\times 3.20 = 7,040<\/p>\n\n\n\n

            Answers<\/strong>:<\/p>\n\n\n\n

              \n
            • Straight-Line Depreciation = $8,000<\/strong><\/li>\n\n\n\n
            • Double-Declining-Balance Depreciation = $20,000<\/strong><\/li>\n\n\n\n
            • Activity-Based Depreciation = $7,040<\/strong><\/li>\n<\/ul>\n\n\n\n
              \n\n\n\n

              143. Chubbyville Van (Multiple Depreciation Methods)<\/strong><\/h3>\n\n\n\n

              Given:<\/strong><\/p>\n\n\n\n

                \n
              • Cost of Van = $23,500<\/li>\n\n\n\n
              • Residual Value = $2,500<\/li>\n\n\n\n
              • Useful Life = 4 years<\/li>\n\n\n\n
              • Total Miles = 105,000 miles<\/li>\n\n\n\n
              • Actual Miles Driven: Year 1 = 24,000 miles, Year 2 = 26,000 miles, Year 3 = 22,000 miles, Year 4 = 25,000 miles<\/li>\n<\/ul>\n\n\n\n

                (1) Straight-Line Depreciation:<\/strong><\/h4>\n\n\n\n

                Depreciation Expense per Year=23,500\u22122,5004=21,0004=5,250\\text{Depreciation Expense per Year} = \\frac{23,500 – 2,500}{4} = \\frac{21,000}{4} = 5,250<\/p>\n\n\n\n

                Answer<\/strong>: $5,250 per year<\/p>\n\n\n\n

                (2) Double-Declining-Balance Depreciation:<\/strong><\/h4>\n\n\n\n

                Double-Declining Rate = 24=50%\\frac{2}{4} = 50\\%<\/p>\n\n\n\n

                Year 1 Depreciation = 23,500\u00d750%=11,75023,500 \\times 50\\% = 11,750<\/p>\n\n\n\n

                Year 2 Depreciation = (23,500\u221211,750)\u00d750%=5,875(23,500 – 11,750) \\times 50\\% = 5,875<\/p>\n\n\n\n

                Year 3 Depreciation = (23,500\u221211,750\u22125,875)\u00d750%=2,937.50(23,500 – 11,750 – 5,875) \\times 50\\% = 2,937.50<\/p>\n\n\n\n

                Year 4 Depreciation = The remaining amount to reach residual value.<\/p>\n\n\n\n

                (3) Activity-Based Depreciation:<\/strong><\/h4>\n\n\n\n

                Depreciation per Mile=23,500\u22122,500105,000=21,000105,000=0.20 per mile\\text{Depreciation per Mile} = \\frac{23,500 – 2,500}{105,000} = \\frac{21,000}{105,000} = 0.20 \\text{ per mile}<\/p>\n\n\n\n

                For Year 1: 24,000\u00d70.20=4,80024,000 \\times 0.20 = 4,800<\/p>\n\n\n\n

                For Year 2: 26,000\u00d70.20=5,20026,000 \\times 0.20 = 5,200<\/p>\n\n\n\n

                For Year 3: 22,000\u00d70.20=4,40022,000 \\times 0.20 = 4,400<\/p>\n\n\n\n

                For Year 4: 25,000\u00d70.20=5,00025,000 \\times 0.20 = 5,000<\/p>\n\n\n\n

                Answers<\/strong>:<\/p>\n\n\n\n

                  \n
                • Straight-Line Depreciation = $5,250 per year<\/strong><\/li>\n\n\n\n
                • Double-Declining-Balance Depreciation = $11,750 for Year 1<\/strong>, and continue to apply the formula for the next years.<\/li>\n\n\n\n
                • Activity-Based Depreciation = $4,800 for Year 1<\/strong>, and continue for the next years.<\/li>\n<\/ul>\n\n\n\n

                  Let me create the image representation of this data!<\/p>\n\n\n\n

                  Here is a visual representation of the depreciation calculations for Taco Hut, China Dragon, Stephan’s Resorts, and Chubbyville, including the different depreciation methods. Let me know if you need any further explanations or adjustments!<\/p>\n\n\n\n

                  \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

                  140.Taco Hut purchased equipment on May 1, 2012, for $15,000. Residual value at the end of an estimated 8 year service life is expected to be $3,000. Calculate depreciation expense using the straight-line method for 2012 and 2013, assuming a December 31 year-end. 141.China Dragon purchased new restaurant equipment on September 1, 2012, for $8,000. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-203515","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203515","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=203515"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203515\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=203515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=203515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=203515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}