Question

Comparing Three Depreciation Methods

Waylander Coatings Company purchased waterproofing equipment on January 6 for $487,400. The equipment was expected to have a useful life of four years, or 10,400 operating hours, and a residual value of $40,200. The equipment was used for 4,000 hours during Year 1, 3,200 hours in Year 2, 1,900 hours in Year 3, and 1,300 hours in Year 4.

Required:

1. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, 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 four years by each method.

Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

Depreciation Expense
Year	Straight-Line Method	Units-of-Output Method	Double-Declining-Balance Method
Year 1	$	$	$
Year 2	$	$	$
Year 3	$	$	$
Year 4	$	$	$
Total	$	$	$

2. What method yields the highest depreciation expense for Year 1?

3. What method yields the most depreciation over the four-year life of the equipment?

Answer 1

1

Depreciation Expense
Year	Straight-Line Method	Units-of-Output Method	Double-Declining-Balance Method
Year 1	111800	172000	243700
Year 2	111800	137600	121850
Year 3	111800	81700	60925
Year 4	111800	55900	20725
Total	447200	447200	447200

Working notes for the above answer is as under

1

Double declining balance method
Year	opening balance	Rate	Depreciation	Closing balance
Year 1	487400	50%	243700	243700
Year 2	243700	50%	121850	121850
Year 3	121850	50%	60925	60925
Year 4	60925	50%	20725	40200

2

________________________________________________________

2

What method yields the highest depreciation expense for Year 1?

Double declining balance method yields the highest depreciation expense for Year 1

_________________________________________________________

3.

What method yields the most depreciation over the four-year life of the equipment?

All three method yields the same depreciation over the four-year life of the equipment that is $447200

depreciation over the four-year life

=Cost -salvage value

=487,400-40,200

=$447200

So we can say that, all three method yields the same depreciation over the four-year life of the equipment that is $447200