Comparing Three Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $187,000. The equipment was expected to have a useful life of four years, or 5,200 operating hours, and a residual value of $15,400. The equipment was used for 1,820 hours during Year 1, 1,092 hours in Year 2, 1,456 hours in Year 3, and 832 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the four 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 four years by each method. Round the answer for each year to the nearest whole dollar. Depreciation Expense Year Year 1 Year 2 Year 3 Year 4 Total Straight-Line Method $ 42,900 ✔ 42,900 ✔ 42,900 42,900 ✔ 171,600 ✔ Units-of-Activity Method $ $ 60,060 V✔ 36,036 48,048 27,456 171,600 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method ✔ Double-Declining- Balance Method $ $ $ $ $ 3. What method yields the most depreciation over the four-year life of the equipment? All three depreciation methods 93,500 ✓
Comparing Three Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $187,000. The equipment was expected to have a useful life of four years, or 5,200 operating hours, and a residual value of $15,400. The equipment was used for 1,820 hours during Year 1, 1,092 hours in Year 2, 1,456 hours in Year 3, and 832 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the four 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 four years by each method. Round the answer for each year to the nearest whole dollar. Depreciation Expense Year Year 1 Year 2 Year 3 Year 4 Total Straight-Line Method $ 42,900 ✔ 42,900 ✔ 42,900 42,900 ✔ 171,600 ✔ Units-of-Activity Method $ $ 60,060 V✔ 36,036 48,048 27,456 171,600 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method ✔ Double-Declining- Balance Method $ $ $ $ $ 3. What method yields the most depreciation over the four-year life of the equipment? All three depreciation methods 93,500 ✓
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $187,000. The equipment was expected to have a useful life
of four years, or 5,200 operating hours, and a residual value of $15,400. The equipment was used for 1,820 hours during Year
1, 1,092 hours in Year 2, 1,456 hours in Year 3, and 832 hours in Year 4.
Required:
1. Determine the amount of depreciation expense for the four 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
four years by each method. Round the answer for each year to the nearest whole dollar.
Depreciation Expense
Year
Year 1
Year 2
Year 3
Year 4
Total
Straight-Line Method
SA
LA
SA
$
$
42,900
42,900
42,900
42,900
171,600
Units-of-Activity
Method
$
LA
SA
$
LA
LA
LA
60,060
36,036
48,048
27,456
171,600 ✔
2. What method yields the highest depreciation expense for Year 1?
Double-declining-balance method
Double-Declining-
Balance Method
S
LA
LA
$
LA
3. What method yields the most depreciation over the four-year life of the equipment?
All three depreciation methods
93,500
✓
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