Question

Comparing Three Depreciation Methods

Waylander Coatings Company purchased waterproofing equipment on January 6 for $627,800. The equipment was expected to have a useful life of four years, or 6,400 operating hours, and a residual value of $51,800. The equipment was used for 2,400 hours during Year 1, 2,000 hours in Year 2, 1,200 hours in Year 3, and 800 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

Answer 1

Cost of the Equipment 627800 Less : Salvage Value 51800 Depreciable Value of the Equipment 576000 Life of the Equipment Life of the Equipment 6400 Straight Line Method Annual Depreciation : Depreciable Value / Life annual Depreciation :576000/4 144000 Units of Activity Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit : 576000/6400 90.00 Units of Activity Method Year Units Year 1 2400 Year 2 2000 Year 3 1200 Year 4 800 Double Declining balance Method Rate of Depreciation = (1/ Life) *2 Depreciation Rate = (1/4)*2 50% Double Declining balance Method Depreciation Year Expenses Year 1 313900 Year 2 156950 Year 3 78475 Year 4 26675 Depreciation 216000 180000 108000 72000

Year 11 Double Declining balance Method Book Value Depreciation % Depreciation Book value 6278001 50% 313900 3139001 50% 156950 156950 50% 78475 78475 50% 26675 3139001 156950 78475 51800 Year 1 Year 2 Year 3 Year 4 Total Answers Straight LineUnits of Activity Double Declining Method Method balance Method 144000 216000 313900 144000 180000 156950 144000 108000 78475 144000 72000 26675 576000 576000 576000 WhichMethod Yield highest depreicaiotn in Year 1 Double Declining balance Method All three Methods which Method yields most depreciation