Chapter 10 1. PR.10.01. ALGO 2. PR.10.02 ALGO eBook Show Me How Comparing Three Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $512,400. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual value of $42,400. The equipment was used for 3,500 hours during Year 1,2,100 hours in Year 2, 2,800 hours in Year 3, and 1,600 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the four years ending 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 four years by each method. Round the answer for each year to the nearest whole dollar. Depreciation Expense Year Year 1 Year 2 Year 3 Straight-Line Method Units-of-Activity Method Double-Declining- Balance Method 22,500 X 28,500 X 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 Feedback Check My Work Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation. Annual units-of-production depreciation allocates the cost of the asset equally over the units produced (hours). The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero. Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method