Question

PROBLEM Il: Waldum Company purchased packaging equipment on Jan 5, 2012 for $135,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of $13,500. The equipment was used for 8,600 hours during 2012, 5.300 hours in 2013, and 4,100 hours in 2014. mine the amount of depreciation expense for the years ended 2012, 2013, 2014, 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 three years by each method. The following columnar headings are suggested for recording the depreciation expense amount Depreciation Expense: Years 2012 2013 2014 2) What method yields the highest depreciation expense for 20127 3) What method yields the most depreciation over the three-year life of the equipment?

Answer 1

1.

Depreciation Expenses

Years	Straight Line	Units of Output	Double Decline
2012	$ 40,500 [($ 135,000 - $ 13,500) / 3 Years]	$ 58,050 [($ 135,000 - $ 13,500)*8600 / 18000)	$ 90,000 [($135,000/3)*2]
2013	$ 40,500 [($ 135,000 - $ 13,500) / 3 Years]	$ 35,775 [($ 135,000 - $ 13,500)*8600 / 18000)	$ 30,000 [($ 45,000/3)*2]
2014	$ 40,500 [($ 135,000 - $ 13,500) / 3 Years]	$ 27,675 [($ 135,000 - $ 13,500)*8600 / 18000)	$ 10,000 [($ 15,000/3)*2]

2. Double Decline method yields the highest depreciation for 2012.

3. Double Decline method yields the Most depreciation over the three year life of the equipment.