Comparing three depreciation methods Dexter Industries purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of $3,600. The equipment was used for 7,200 hours during Year 1, 5,400 hours in Year 2, and 5,400 hours in Year 3. Required: 1.  Determine the amount of depreciation expense for the three 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 three years by each method. Round the final answers for each year to the nearest whole dollar.  2.  What method yields the highest depreciation expense for Year 1? 3.  What method yields the most depreciation over the three-year life of the equipment?

College Accounting (Book Only): A Career Approach
13th Edition
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:Scott, Cathy J.
ChapterA: Methods Of Depreciation
Section: Chapter Questions
Problem 1P: A delivery van was bought for 18,000. The estimated life of the van is four years. The trade-in...
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Comparing three depreciation methods

Dexter Industries purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of $3,600. The equipment was used for 7,200 hours during Year 1, 5,400 hours in Year 2, and 5,400 hours in Year 3.

Required:

1.  Determine the amount of depreciation expense for the three 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 three years by each method. Round the final answers for each year to the nearest whole dollar. 

2.  What method yields the highest depreciation expense for Year 1?

3.  What method yields the most depreciation over the three-year life of the equipment? 

 

 

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