Comparing three depreciation methods Dexter Industries purchased packaging equipment on January 8 for $135,000. The equipment was expected to have a useful life of 3 years, or 27,000 operating hours, and a residual value of $5,400. The equipment was used for 10.800 hours during Year 1. 8.100 hours in Year 2, and 8,100 hours in Year 3. Required: 1. Determine the amount of depreciation expense for the 3 years ending December 31, by (a) the straight-line method. (b) the units-of-activity method, and (c) the double- declining-balance method. Also determine the total depreciation expense for the 3 years by each method. Do not round intermediate calculations when determining the depreciation rate. Round the final answers for each year to the nearest whole dollar. Depreciation Expense Year Year 1 Year 2 Year 3 Straight-Line Method Units-of-Activity Method Double Declining-Balance Method Total 2. What method yields the highest depreciation expense for Year 17 3. What method yields the most depreciation over the 3-year life of the equipment?
Comparing three depreciation methods Dexter Industries purchased packaging equipment on January 8 for $135,000. The equipment was expected to have a useful life of 3 years, or 27,000 operating hours, and a residual value of $5,400. The equipment was used for 10.800 hours during Year 1. 8.100 hours in Year 2, and 8,100 hours in Year 3. Required: 1. Determine the amount of depreciation expense for the 3 years ending December 31, by (a) the straight-line method. (b) the units-of-activity method, and (c) the double- declining-balance method. Also determine the total depreciation expense for the 3 years by each method. Do not round intermediate calculations when determining the depreciation rate. Round the final answers for each year to the nearest whole dollar. Depreciation Expense Year Year 1 Year 2 Year 3 Straight-Line Method Units-of-Activity Method Double Declining-Balance Method Total 2. What method yields the highest depreciation expense for Year 17 3. What method yields the most depreciation over the 3-year life of the equipment?
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Comparing three depreciation methods
Dexter Industries purchased packaging equipment on January 8 for $135,000. The equipment was expected to have a useful life of 3 years, or 27,000 operating hours, and a
residual value of $5,400. The equipment was used for 10,800 hours during Year 1, 8,100 hours in Year 2, and 8,100 hours in Year 3.
Required:
1. Determine the amount of depreciation expense for the 3 years ending December 31, by (a) the straight-line method. (b) the units-of-activity method, and (c) the double-
declining-balance method. Also determine the total depreciation expense for the 3 years by each method. Do not round intermediate calculations when determining the
depreciation rate. Round the final answers for each year to the nearest whole dollar.
Depreciation Expense
Year
Year 1
Year 2
Year 3
Total
Straight-Line
Method
Units-of-Activity
Method
Double-Declining-Balance
Method
2. What method yields the highest depreciation expense for Year 17
3. What method yields the most depreciation over the 3-year life of the equipment?
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