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Dexter Industries purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of $4,500. The equipment was used for 7,600 hours during year 1, 6,000 hours in year 2, and 4,400 hours in year 3. ( year 1 straight line depreciation $22,500)
.Instructions
1. Determine the amount of depreciation expense for the three years ending in December 31, 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 three years by each method. The following columnar headings are suggested for recording the depreciations expense amounts.
Depreciation Expense
Straight line method Units of Activity Method Double Declining Balance Method
Year
2. What method yields the highest depreciation expense for year 1?
3. What method yields the most depreciation over the three year life of the equipment?
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