Comparing Three Depreciation Methods Newbirth Coatings Company purchased waterpr

Question

Comparing Three Depreciation Methods

Newbirth Coatings Company purchased waterproofing equipment on January 2, 2011, for $704,200. The equipment was expected to have a useful life of four years, or 6,800 operating hours, and a residual value of $58,200. The equipment was used for 2,600 hours during 2011, 2,100 hours in 2012, 1,200 hours in 2013, and 900 hours in 2014.

Required:

1.  Determine the amount of depreciation expense for the years ended December 31, 2011, 2012, 2013, and 2014, 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. Do not round your intermediate calculations.

2.  What method yields the highest depreciation expense for 2013?
SelectStraight-line methodUnits-of-output methodDouble-declining-balance methodAll three depreciation methodsItem 16

3.  What method yields the most depreciation over the four-year life of the equipment?
SelectStraight-line methodUnits-of-output methodDouble-declining-balance methodAll three depreciation methodsItem 17 g

Depreciation Expense Year Straight-Line Method Units-of-Output Method Double-Declining-Balance Method 2011 $ $ $ 2012 $ $ $ 2013 $ $ $ 2014 $ $ $ Total $ $ $ Comparing Three Depreciation Methods Newbirth Coatings Company purchased waterproofing equipment on January 2, 2011, for $704,200. The equipment was expected to have a useful life of four years, or 6,800 operating hours, and a residual value of $58,200. The equipment was used for 2,600 hours during 2011, 2,100 hours in 2012, 1,200 hours in 2013, and 900 hours in 2014. Required: Determine the amount of depreciation expense for the years ended December 31, 2011, 2012, 2013, and 2014, 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. Do not round your intermediate calculations. What method yields the highest depreciation expense for 2013? What method yields the most depreciation over the four-year life of the equipment?

Explanation / Answer

STRAIGHT LINE

2011 $161,500

2012 $161,500

2013 $161,500

2014 $161,500

Total $646,000

UNITS OF OUTPUT

2011 $247,000

2012 $199,500

2013 $114,000

2014 $85,500

Total $646,000

DOUBLE DECLINING

2011 $352,100

2012 $176,050

2013 $88,025

2014 $29,825

Total $646,000

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