Question

mus Dexter Industries purchased packaging equipment on January 8 for $108,000. The equipment was expected to have a useful life of three years, or 27.000 operating hours, and a residual value of $5,400. The equipment was used for 10,800 hours during Year 1, 8, 100 hours in Year 2, and 8,100 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. Round the final answers 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

Answer 1

Cost of the Equipment 108000 Less : Salvage Value 54001 Depreciable Value of the Equipment 102600 Life of the Equipment Life of the Equipment 27000 Straight Line Method Annual Depreciation : Depreciable Value / Life annual Depreciation : 102600/3 34200 Units of Activity Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit : 102600/27000 4.56 Units of Activity Method Year Units Year 1 10800 Year 2 8100 Year 3 8100 Double Declining balance Method Rate of Depreciation = (1/ Life) *2 Depreciation Rate = (1/3)*2 Depreciation Double Declining balance Method Depreciation Year Expenses Year 1 72000 Year 2 24000 Year 3 6600 Depreciation 41040 30780 30780

Year 1 Double Declining balance Method Book Value Depreciation % Depreciation Book value 108000 67% 72000 36000 36000 67% 24000 12000 12000 67% 6600 5400 2 3 Year 1 Year 2 Year 3 Total Answers Straight Line Units of Activity Double Declining Method Method balance Method 34200 41040 72000 34200 30780 24000 34200 30780 6600 102600 102600 102600