Messer Company purchased equipment for $24,000. The company considers whether to determine annual depreciation using the straight-line method or the declining-balance method at 150 percent of the straight-line rate. Messer expects to use the equipment for 10 years, at the end of which it will have an estimated salvage value of $4,000.

Comparison of these two alternatives for the first two years. Messer will own the equipment.

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Excess of declining balance over a straight line

Chec Brief Exercise 9.3 Straight-Line and Declining-Balance Depreciation (LO9-3) Messer Company purchased equipment for $24,000. The company is considering whether to determine annual depreciation using the straight-line method or the declining-balance method at 150 percent of the straight-line rate. Messer expects to use the equipment for 10 years, at the end of which it will have an estimated salvage value of $4,000. Prepare a comparison of these two alternatives for the first two years Messer will own the equipment. Year 1 Year 2 Straight-line depreciation $ 2,000 $ 2,000 150% declining-balance depreciation $ 3,600 $ 3,060 Excess of declining-balance over straight-line