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-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Comparing Three
Waylander Coatings Company purchased waterproofing equipment on January 6 for $806,600. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual value of $66,600. The equipment was used for 3,800 hours during Year 1, 3,100 hours in Year 2, 1,800 hours in Year 3, and 1,300 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-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method.
Note: Round the answer for each year to the nearest whole dollar.
| Depreciation Expense | |||||||||
| Year | Straight-Line Method | Units-of-Activity Method | Double-Declining-Balance Method | ||||||
| Year 1 | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 | ||||||
| Year 2 | $fill in the blank 4 | $fill in the blank 5 | $fill in the blank 6 | ||||||
| Year 3 | $fill in the blank 7 | $fill in the blank 8 | $fill in the blank 9 | ||||||
| Year 4 | $fill in the blank 10 | $fill in the blank 11 | $fill in the blank 12 | ||||||
| Total | $fill in the blank 13 | $fill in the blank 14 | $fill in the blank 15 |
2. What method yields the highest depreciation expense for Year 1?
3. What method yields the most depreciation over the four-year life of the equipment?
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