Answer Happy

Dexter Industries purchased packaging equipment on January 8 for $72,000. a 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 usage was as follows: • 7,600 hours in Year 1 • 6,000 hours in Year 2 • 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. 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?
1. Depreciation Expense A. B. Straight- Units-of- Line Activity C. Double Declining Balance Year 1 2 Totals Calculations: Straight-line method: (Cost Residual Value) 1 Years Yearly Depreciation Units-of-activity method: (Cost Residual Value) Total Hours Rate Rate х Hours 4 5 6 17 Yearly Depreciation Year 1 Year 2
Straight-line method: (Cost Residual Value) Years Yearly Depreciation Units-of-activity method: (Cost Residual Value) 1 Total Hours Rate Rate х Hours Yearly Depreciation Year 1 Year 2 Year 3 Double-declining-balance method: Depreciable Balance X Rate Yearly Depreciation Year 1 Year 2 Since depreciation cannot cause book value to fall below residual value: Depreciable Residual Balance Value Yearly Depreciation Year 3 3
H J K L M Year 2 Year 3 Double-declining-balance method: Depreciable Balance X Rate Yearly Depreciation Year 1 Year 2 Since depreciation cannot cause book value to fall below residual value: Depreciable Residual Balance Value Yearly Depreciation Year 3 2. The method that yields the most depreciation expense in Year 1 is the 3 . The method that yields the most total depreciation over the three years is the