PR 9-2B Comparing three depreciation methods Obj. 2 Waylander Coatings Company purchased waterproofing equipment on January 6 for $320,000. The equipment was expected to have a useful life 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 Straight- Double-Declining- Line Activity Balance Method Method 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? Units-of- Year Method oldan 1. Depreciation Expense A. B. Straight- Units-of- Line Activity C. Double-Declining- Balance Year 1 2 3 4 Totals Calculations: Straight-line method: (Cost Residual Value) 1 Years Yearly Depreciation Units-of-activity method: (Cost Residual Value) 1 Total Hours Rate Rate Hours Yearly Depreciation Year 1 Year 2 Year 3 Year 4 Pr. 9-2B Double-declining-balance method: Depreciable Balance Rate Yearly Depreciation Year 1 Year 2 Year 3 Since depreciation cannot cause book value to fall below residual value: Depreciable Residual Balance Value Yearly Depreciation Year 4 2 . The method that yields the most depreciation expense in Year 1 is the 3. The method that yields the most total depreciation over the four years is the