Question

1. Comparing Three Depreciation Methods

Dexter Industries purchased packaging equipment on January 8 for $444,800. The equipment was expected to have a useful life of three years, or 6,000 operating hours, and a residual value of $36,800. The equipment was used for 2,400 hours during Year 1, 1,860 hours in Year 2, and 1,740 hours in Year 3.

Required:

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. For all methods, round the answer for each year to the nearest whole dollar.

Depreciation Expense
Year	Straight-Line Method		Units-of-Activity Method		Double-Declining-Balance Method
Year 1	$fill in the blank 1		$fill in the blank 2		$fill in the blank 3
Year 2	$fill in the blank 4		$fill in the blank 5		$fill in the blank 6
Year 3	$fill in the blank 7		$fill in the blank 8		$fill in the blank 9
Total	$fill in the blank 10		$fill in the blank 11		$fill in the blank 12

Answer 1

Depreciation expense
Year	Straight-Line method	Units of activity method	Double declining method
	= (Cost - Residual value) / 3 years = (444800-36800)/3= 136000 each year	= (Cost - Residual value)*hours used in the year/Total operating hours	= 2 * straight line depreciation = 2* (100%/3 years) = 66.66% on opening book value
Year 1	$                                                      136,000	=(444800-36800)*2400/6000 = 163200	=408000*66.66% = 271972.8
Year 2	$                                                      136,000	=(444800-36800)*1860/6000 = 126480	=(408000-271972.8) * 66.66% = 90675.7
Year 3	$                                                      136,000	=(444800-36800)*1740/6000 = 118320	=(408000-271972.8-90675.7)*66.66% = 30231.3
Total	$                                                      408,000	$                                                        408,000	$                                                        392,880
			Residual balance of 15120 (408000-392880) should ideally be depreciated in Year 3