Question

PR 10-2A Comparing three depreciation OBJ. 2 1.a. Year 1: straight-Dexter Industries purchased packaging equipment on January 8 for $72,000. The equip line depreciation, $22,500 ment was expected to have a useful life of three years, or 18,000 operating residual value of $4,500. The equipment was used for 7,600 hours during Year hours in Year 2, and 4,400 hours in Year 3. 1, 6,000 Instructions 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. The following co the depreciation expense amounts Straight- Line Method Activity Method 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?

Answer 1

Depreciation is charge of cost of asset over the useful life of asset.There are many methods to calculate depreciation.

• Straight line method
• Units activity method
• Sum of year digit method
• Double declining balance method
• MACRS for tax purpose

Note

• In double declining balance method residual value is ignored.

How to calculate rate under this method

1/life of asset*100*2