Comparing three depreciation methods

Obj. 2Waylander Coatings Company purchased waterproofing equipment on January 6 for $320,000. The equipment was expected to have a useful life 3 years or of four years, or 20,000 operating hours, and a residual value of $35,000. The equipment was used for 7,200 hours during Year 1, 6,400 hours in Year 2, 4,400 hours in Year 3, and 2,000 hours in Year 4.

Instructions

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. The following columnar headings are suggested for recording the depreciation expense amounts:

   	Depreciation Expense
   Year	Straight-Line Method	Units-of-Activity Method	Double-Declining-Balance Method

   Answer

   Check Figure: A. Year 1: straight-line depreciation, $71,250

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?

4. excel format