Question

Mountain View Resorts purchased equipment at the beginning of 2021 for $46,000. Residual value at the end of an estimated four- year service life is expected to be $6,100. The machine operated for 2,100 hours in the first year and the company expects the machine to operate for a total of 12,000 hours over its four-year life. Calculate depreciation expense for 2021, using each of the following depreciation methods: (1) straight-line, (2) double-declining- balance, and (3) activity-based. (Round your intermediate calculations to 2 decimal places.) Depreciation Expense Straight-line Double-declining-balance Activity-based

Answer 1

1) straight-line method

depreciation for 2021 = cost - residual value / useful life

= 46,000 - 6,100 / 4

= 9,975

2) double declining balance method

depreciation rate = 100/useful life x 2

= 100/4 x 2

= 50%

depreciation for 2021 = 46,000 x 50%

= 23,000

3) activity-based method

depreciation rate = cost - residula value / useful life in hours

= 46,000 - 6,100 / 12,000

= 3.325 per hour

depreciation for 2021 = 2,100 x 3.325

= 6,983

	depreciation expense
straight line	9,975
double declining balance	23,000
activity-based	6,983