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Comparing Three Depreciation Methods Waylander Coatings Company purchased waterproofing equipment on January 6 for $571,600.
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Answer #1

1.
Straight line Depreciation = (Original Value - Residual Value) / Useful Life
= ($571600-47200) / 4 = $131100

Years Beg Value Depreciation Accumulated Depreciatio End Value
1 $       571,600 $       131,100 $          131,100 $       440,500
2 $       440,500 $       131,100 $          262,200 $       309,400
3 $       309,400 $       131,100 $          393,300 $       178,300
4 $       178,300 $       131,100 $          524,400 $         47,200

Units of Activity Method = (Original Value - Residual Value) / Total Operating Hours
= ($571600-47200) / 7600 = $69 per hour

Years Hours Depreciation Accumulated Depreciatio End Value
1 2900 $       200,100 $          200,100 $       371,500
2 2400 $       165,600 $          365,700 $       205,900
3 1400 $         96,600 $          462,300 $       109,300
4 900 $         62,100 $          524,400 $         47,200

Double Declining Balance method = Beginning Book Value x 2 times straight line rate

Years Beg Value Depreciation @50% Accumulated Depreciatio End Value
1 $       571,600 $       285,800 $          285,800 $       285,800
2 $       285,800 $       142,900 $          428,700 $       142,900
3 $       142,900 $         71,450 $          500,150 $         71,450
4 $         71,450 $         24,250 $          524,400 $         47,200


Maximum Depreciation is such that end book value doesnot get below residual value.
Therefore Depreciation of Year 4 is restricted to $24250

2.
Double Declining Balance method

3.
All methods provide same total depreciation

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