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Problem: Air Pack Company purchased packaging equipment on January 3, 2006 for $90,000. The equipment was expected to have a useful life of three years, or 21,000 operating hours, and a residual value of $6,000. The equipment was used for 8,000 hours during 2006, 7,500 hours in 2007, and 5,500 hours in 2008.
Instructions: Determine the amount of depreciation expense for the years ended December 31, 2006, 2007 and 2008, by (a) the straight-line method, (b) the units-of-production and (c) the double- declining -balance method. Also determine the total depreciation expenses for the three years by each method. The following columnar headings are suggested for recording the depreciation expense amount.
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