Waylander Coatings Company purchased waterproofing equipment on January 6 for $474,400. The equipment was expected to have a useful life of four years, or 6,400 operating hours, and a residual value of $39,200. The equipment was used for 2,400 hours during Year 1, 2,000 hours in Year 2, 1,200 hours in Year 3, and 800 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, 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. Note: Round the answer for each year to the nearest whole dollar. Depreciation Expense Units-of-Activity Method TIT $ 2. What method yields the highest depreciation expense for Year 1? Year Year 1 Year 2 Year 3 Year 4 Total Straight-Line Method $ Double-Declining-Balance Method 3. What method yields the most depreciation over the four-year life of the equipment? $
Waylander Coatings Company purchased waterproofing equipment on January 6 for $474,400. The equipment was expected to have a useful life of four years, or 6,400 operating hours, and a residual value of $39,200. The equipment was used for 2,400 hours during Year 1, 2,000 hours in Year 2, 1,200 hours in Year 3, and 800 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, 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. Note: Round the answer for each year to the nearest whole dollar. Depreciation Expense Units-of-Activity Method TIT $ 2. What method yields the highest depreciation expense for Year 1? Year Year 1 Year 2 Year 3 Year 4 Total Straight-Line Method $ Double-Declining-Balance Method 3. What method yields the most depreciation over the four-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
Waylander Coatings Company purchased waterproofing equipment on January 6 for $474,400. The equipment was expected to have a useful life of four years, or 6,400 operating hours, and a residual value of $39,200. The equipment was used for 2,400 hours
during Year 1, 2,000 hours in Year 2, 1,200 hours in Year 3, and 800 hours in Year 4.
Required:
1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, 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.
Note: Round the answer for each year to the nearest whole dollar.
Year
Year 1
Year 2
Year 3
Year 4
Total
Straight-Line Method
$
$
$
Depreciation Expense
Units-of-Activity Method
$
$
$
$
2. What method yields the highest depreciation expense for Year 1?
3. What method yields the most depreciation over the four-year life of the equipment?
Double-Declining-Balance Method
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Step 1: Define Depreciation expense
VIEWStep 2: Computation of Depreciation as per Straight-line method is as follows:
VIEWStep 3: Computation of Depreciation as per Units of activity method is as follows:
VIEWStep 4: Computation of Depreciation as per Double declining balance method is as follows:
VIEWStep 5: Method yields highest depreciation in Year 1
VIEWStep 6: Method yields most depreciation over the four year of life
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