Question

Dexter Industries purchased packaging equipment on January 8 for $111,200. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $7,200. The equipment was used for 8,680 hours during Year 1, 7,360 hours in Year 2, and 3,960 hours in Year 3.

	Required:
1.	Determine the amount of depreciation expense for the three years ended 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. (Note: For STRAIGHT-LINE ONLY, round the first two years to the nearest whole dollar, then round the third year as necessary. For DECLINING BALANCE ONLY, round the multiplier to five decimal places. Then round the answer for each year to the nearest whole dollar.)
2.	What method yields the highest depreciation expense for Year 1?
3.	What method yields the most depreciation over the three-year life of the equipment? 1. Determine the amount of depreciation expense for the three years ended 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. (Note: For STRAIGHT-LINE ONLY, round the first two years to the nearest whole dollar, then round the third year as necessary. For DECLINING BALANCE ONLY, round the multiplier to five decimal places. Then round the answer for each year to the nearest whole dollar.) Score: 37/45 Depreciation Expense 1 Year Straight-Line Method Units-of-Activity Method Double-Declining-Balance Method 2 Year 1 34667 ✔45136 3 Year 2 34667 38272 ✔24711 4 Year 3 34666 20592 5 Total 104000 104000 104000

Answer 1

Straight Line method
Year	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion						$1,11,200
1	$1,11,200	$1,04,000	33.33%	$34,667	$34,667	$76,533
2	$1,11,200	$1,04,000	33.33%	$34,667	$69,333	$41,867
3	$1,11,200	$1,04,000	33.33%	$34,667	$1,04,000	$7,200
Units of production
Date	Depreciable cost	Depreciation per hour	No. of Hours	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion						$1,11,200
1	$1,04,000	$5.20	8680	$45,136	$45,136	$66,064
2	$1,04,000	$5.20	7360	$38,272	$83,408	$27,792
3	$1,04,000	$5.20	3960	$20,592	$1,04,000	$7,200
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion						$1,11,200
1	$1,11,200	$1,11,200	66.67%	$74,133	$74,133	$37,067
2	$1,11,200	$37,067	66.67%	$24,711	$98,844	$12,356
3	$1,11,200	$12,356	66.67%	$5,156	$1,04,000	$7,200
Part 2
As it can be seen that the highest depreciation in Year 1 is yield by Double Declining Balance method
Part 3
All the depreciation method will yield the same amount of Depreciation expense of $104,000 over the life of the asset