Question

Please let me know how to do all the three methods.

Comparing Three Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $199,200. The equipment was expected to have a useful life of three years, or 6,300 operating hours, and a residual value of $16,500. The equipment was used for 2,520 hours during Year 1, 1,953 hours in Year 2, and 1,827 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 Units-of-Activity Method Year Straight-Line Method Double-Declining-Balance Method Year 1 60,900 73,080 ✓ $ 132,800 Year 2 60,900 56,637 ✓ $ 44,267 ✓ Year 3 60,900 ✓ 52,983 ✓ $ 5,633 Total 182,700 182,700 $ 182,700 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method 3. What method yields the most depreciation over the three-year life of the equipment? All three denreciation methods

Answer 1

Solution:

Depreciation Expense
Year	Straight-Line	Units-of-Activity Method	Double-Declining-Balance Method
Year 1	$          60,900	$                             73,080	$                              132,800
Year 2	$          60,900	$                             56,637	$                                44,267
Year 3	$          60,900	$                             52,983	$                                   5,633
Totals	$        182,700	$                          182,700	$                              182,700

Working:

1) Straight Line Method = (199200-16500) / 3 = $ 60,900

2) Units of Activity Method:

Year	Units-of-Activity Method	Calculation
1	$                               73,080	(199200-16500)/6300*2520
2	$                               56,637	(199200-16500)/6300*1953
3	$                               52,983	(199200-16500)/6300*1827
Total	$                             182,700

3) Double-Declining-Balance Method

Year	Opening Balance	Depreciation	Accumulated Depreciation	Closing Balance	Depreciation Calculation
1	$        199,200	$                          132,800	$                              132,800	$          66,400	199200*1/3*2
2	$          66,400	$                             44,267	$                              177,067	$          22,133	66400*1/3*2
3	$          22,133	$                               5,633	$                              182,700	$          16,500	22133-16500