Dexter Industries purchased packaging equipment on January 8 for $219,800. The equipment was expected to have a useful life of four years, or 7,200 operating hours, and a residual value of $18,200. The equipment was used for 2,520 hours during Year 1, 1,512 hours in Year 2, 2,016 hours ir (ear 3, and 1,152 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 Units-of-Activity Double-Declining- Year Straight-Line Method Method Balance Method Year 1 50,400 V $ 70,560 V 100,800 X Year 2 50,400 V $ 42,336 V 1,213,333 X Year 3 50,400 V $ 56,448 V $ Year 4 50,400 V $ 32,256 V $ Total 201,600 V $4 201,600 V $ 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method 3. What method yields the most depreciation over the four-year life of the equipment? AIl throo
Dexter Industries purchased packaging equipment on January 8 for $219,800. The equipment was expected to have a useful life of four years, or 7,200 operating hours, and a residual value of $18,200. The equipment was used for 2,520 hours during Year 1, 1,512 hours in Year 2, 2,016 hours ir (ear 3, and 1,152 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 Units-of-Activity Double-Declining- Year Straight-Line Method Method Balance Method Year 1 50,400 V $ 70,560 V 100,800 X Year 2 50,400 V $ 42,336 V 1,213,333 X Year 3 50,400 V $ 56,448 V $ Year 4 50,400 V $ 32,256 V $ Total 201,600 V $4 201,600 V $ 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method 3. What method yields the most depreciation over the four-year life of the equipment? AIl throo
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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Solve Double Declining Balance Method
Transcribed Image Text:Comparing Three Depreciation Methods
Dexter Industries purchased packaging equipment on January 8 for $219,800. The equipment was expected to have a useful life of four years, or
7,200 operating hours, and a residual value of $18,200. The equipment was used for 2,520 hours during Year 1, 1,512 hours in Year 2, 2,016 hours in
Year 3, and 1,152 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
Units-of-Activity
Double-Declining-
Year
Straight-Line Method
Method
Balance Method
Year 1
$
50,400
$
70,560
$4
100,800 x
Year 2
2$
50,400
2$
42,336
$4
1,213,333| Х
Year 3
2$
50,400
$
56,448
Year 4
$
50,400
$
32,256
$4
Total
201,600
$4
201,600
2. What method yields the highest depreciation expense for Year 1?
Double-declining-balance method
3. What method yields the most depreciation over the four-year life of the equipment?
All three depreciation methods
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