Monte’s Coffee Company purchased packaging equipment on January 5, 2014, for $90,000. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,000. The equipment was used for 8,900 hours during 2014, 7,100 hours in 2015, and 4,000 hours in 2016.
Instructions
1. Determine the amount of depreciation expense for the years ended December 31, 2014, 2015, and 2016 by (a) the straight-line method, (b) the units-of-output 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. What method yields the highest depreciation expense for 2014?
3. What method yields the most depreciation over the three-year life of the equipment?