Question

Comparing Three Depreciation Methods Waylander Coatings Company purchased waterproofing equipment on January 6 for $555,000. The equipment was expected to have a useful life of four years, or 7,600 operating hours, and a residual value of $45,800. The equipment was used for 2,900 hours during Year 1, 2,400 hours in Year 2, 1,400 hours in Year 3, and 900 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? Double-declining-balance method 3. What method yields the most depreciation over the four-year life of the equipment? All three depreciation methods Feedback Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation. Annual units-of-production depreciation allocates the cost of the asset equally over the units produced (hours). The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero. Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method. Learning Objective 2. Check My Work

Answer 1