Question

Depreciation Methods

Winsey Company purchased equipment on January 2, 2016, for $700,000. The equipment has the following characteristics:

Estimated service life	20 years, 100,000 hours, 950,000 units of output
Estimated residual value	$50,000

During 2016 and 2017, the company used the machine for 4,500 and 5,500 hours, respectively, and produced 40,000 and 60,000 units, respectively.

Required:

Compute depreciation expense for 2016 under each of the following methods:

Round the depreciation rate per hour to 3 decimal places and depreciation rate per unit to 2 decimal places. If required, round your final answers to the nearest dollar.

1. Straight-line method	$
2. Activity method (Hours worked)	$
3. Activity method (Units of output)	$
4. Sum-of-the-years'-digits method	$
5. Double-declining-balance method	$
6. 150%-declining-balance method	$

Compute depreciation expense for 2017 under each of the following methods:

Round the depreciation rate per hour to 3 decimal places and depreciation rate per unit to 2 decimal places. If required, round your final answers to the nearest dollar.

1. Straight-line method	$
2. Activity method (Hours worked)	$
3. Activity method (Units of output)	$
4. Sum-of-the-years'-digits method	$
5. Double-declining-balance method	$
6. 150%-declining-balance method	$

7. If Winsey used a service life of 16 years, 80,000 hours, or 750,000 units of output, what would be the effect on depreciation expense under the straight-line, sum-of-the-years'-digits, and declining-balance depreciation methods?

If required, round your answers to the nearest dollar.

	2016	2017
Straight-line method	$	$
Activity method (hours worked)	$	$
Activity method (units of output)	$	$
Sum-of-the-years'-digits method	$	$
Double-declining-balance method	$	$
150%-declining-balance method	$	$

Answer 1