Question

Comparing Three Depreciation Methods

Waylander Coatings Company purchased waterproofing equipment on January 6 for $321,800. The equipment was expected to have a useful life of four years, or 7,200 operating hours, and a residual value of $26,600. The equipment was used for 2,700 hours during Year 1, 2,200 hours in Year 2, 1,300 hours in Year 3, and 1,000 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-activity 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-Activity Method    Double-Declining-Balance Method

Year 1 $_______________ $___________________ $______________________

Year 2 $_______________ $___________________ $______________________

Year 3 $_______________ $___________________ $______________________

Year 4 $_______________ $___________________ $______________________

Total $_______________ $___________________ $______________________

What method yields the highest depreciation expense for Year 1? ______________

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

Answer 1