Comparing Three Depreciation Methods
Dexter Industries purchased packaging equipment on January 8 for $310,600. The equipment was expected to have a useful life of three years, or 7,500 operating hours, and a residual value of $25,600. The equipment was used for 3,000 hours during Year 1, 2,325 hours in Year 2, and 2,175 hours in Year 3.
Required:
1. Determine the amount of depreciation expense for the three years ending December 31, Year 1, Year 2, Year 3, 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 three years by each method.
Note: For all methods, round the answer for each year to the nearest whole dollar.
Depreciation Expense Year Straight-Line Method Units-of-Activity Method Double-Declining-Balance Method Year 1 $ $ $ Year 2 $ $ $ Year 3 $ $ $ Total $ $ $
2. What method yields the highest depreciation expense for Year 1?
All three depreciation methods
3. What method yields the most depreciation over the three-year life of the equipment?
Comparing Three Depreciation Methods
Dexter Industries purchased packaging equipment on January 8 for $310,600. The equipment was expected to have a useful life of three years, or 7,500 operating hours, and a residual value of $25,600. The equipment was used for 3,000 hours during Year 1, 2,325 hours in Year 2, and 2,175 hours in Year 3.
Required:
1. Determine the amount of depreciation expense for the three years ending December 31, Year 1, Year 2, Year 3, 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 three years by each method.
Note: For all methods, round the answer for each year to the nearest whole dollar.
| Depreciation Expense | ||||||
| Year | Straight-Line Method | Units-of-Activity Method | Double-Declining-Balance Method | |||
| Year 1 | $ | $ | $ | |||
| Year 2 | $ | $ | $ | |||
| Year 3 | $ | $ | $ | |||
| Total | $ | $ | $ | |||
2. What method yields the highest depreciation expense for Year 1?
All three depreciation methods
3. What method yields the most depreciation over the three-year life of the equipment?
Related questions
Depreciation by Three Methods; Partial Years
Perdue Company purchased equipment on April 1 for $48,870. The equipment was expected to have a useful life of three years, or 4,320 operating hours, and a residual value of $1,350. The equipment was used for 800 hours during Year 1, 1,500 hours in Year 2, 1,300 hours in Year 3, and 720 hours in Year 4.
Required:
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) units-of-output method, and (c) the double-declining-balance method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
b. Units-of-output method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
c. Double-declining-balance method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
Feedback
Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation.
Annual units-of-output depreciation allocates the cost of the asset equally over the units produced (hours).
The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation.
Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method.
Learning Objective 2.
Monteâs Coffee Company purchased packaging equipment on January5, 2014, for $90,000. The equipment was expected to have a usefullife of three years, or 20,000 operating hours, and a residualvalue of $6,000. The equipment was used for 8,900 hours during2014, 7,100 hours in 2015, and 4,000 hours in 2016.
| Required: | |
| 1. | Determine the amount ofdepreciation expense for the years ended December 31, 2014, 2015,and 2016 by (a) the straight-line method, (b) the units-of-outputmethod, and (c) the double-declining-balance method. Also determinethe total depreciation expense for the three years by each method.(Note: For DECLINING BALANCE ONLY, round theanswer for each year to the nearest whole dollar.) |
| 2. | What method yields the highestdepreciation expense for 2014? |
| 3. | What method yields the mostdepreciation over the three-year life of the equipment? |
X
Depreciation Expense
1. Determine the amount of depreciation expense for the yearsended December 31, 2014, 2015, and 2016 by (a) the straight-linemethod, (b) the units-of-output method, and (c) thedouble-declining-balance method. Also determine the totaldepreciation expense for the three years by each method.
Score: 0/45
Depreciation Expense |
1 | Year | Straight-Line Method | Units-of-Output Method | Double-Declining-Balance Method |
2 | 2014 | |||
3 | 2015 | |||
4 | 2016 | |||
5 | Total |
Points:
0 / 12
Feedback
Check My Work
Asset cost minus residual value equals depreciable cost. Sum theyearly depreciation to determine total depreciation.
Annual units-of-production depreciation allocates the cost ofthe asset equally over the units produced (hours).
The double-declining rate is two times the straight-line rate.Book value is the asset cost minus accumulated depreciation. In thefirst year, the balance in the accumulated depreciation account iszero.
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