Reference no: EM132922536

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 $4,500. The equipment was used for 7,600 hours during Year 1, 6,000 hours in Year 2, and 4,400 hours in Year 3.

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 columnar headings are suggested for recording the depreciation expense amounts:
2.  Depreciation ExpenseYearStraight-Line MethodUnits-of-Activity MethodDouble-Declining-Balance Method

 

1. What method yields the highest depreciation expense for Year 1?
2. What method yields the most depreciation over the three-year life of the equipment?

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