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:
|
|
Depreciation Expense |
Year |
Straight-line-method |
Units-of-Activity Method |
Double Declining Balance 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?