Question

Waylander Coatings Company purchased waterproofing equipment on January 6, 2015, 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 2015, 6,400 hours in 2016, 4,400 hours in 2017, and 2,000 hours in 2018.

Required:

1.

Determine the amount of depreciation expense for the years ended December 31, 2015, 2016, 2017, and 2018, by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method. (Note: For DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.)

2.

What method yields the highest depreciation expense for 2015?

3.

What method yields the most depreciation over the four-year life of the equipment?

Determine the amount of depreciation expense for the years ended December 31, 2015, 2016, 2017, and 2018, by (a) the straight-line method, (b) the units-of-output method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method.

Depreciation Expense

1	Year	Straight-Line Method	Units-of-Output Method	Double-Declining-Balance Method
2	2015
3	2016
4	2017
5	2018
6	Total

2. What method yields the highest depreciation expense for 2015?

Straight-line method

Units-of-output method

Double-declining-balance method

All three depreciation methods

3. What method yields the most depreciation over the four-year life of the equipment?

Straight-line method

Units-of-output method

Double-declining-balance method

All three depreciation methods

Answer 1

1) Depreciation schedule :

Depreciation base : (320000-35000) = 285000

Depreciation rate = 285000/20000 = 14.25 per hour

Double decline rate = 100/4/*2 = 50%

	Straight line	Unit of output	Double decline
2015	285000/4 = 71250	7200*14.25 = 102600	320000*50% = 160000
2016	71250	6400*14.25 = 91200	160000*50% = 80000
2017	71250	4400*14.25 = 62700	80000*50% = 40000
2018	71250	2000*14.25 = 28500	5000
Total	285000	285000	285000

2) Double decline balance method

3) All three depreciation method