Hawaiian Specialty Foods purchased equipment for $19,000. Residual value at the

Question

Hawaiian Specialty Foods purchased equipment for $19,000. Residual value at the end of an estimated four-year service life is expected to be $1,900. The machine operated for 2,400 hours in the first year, and the company expects the machine to operate for a total of 18,000 hours. Calculate depreciation expense for the first year using each of the following depreciation methods: (1) straight-line, (2) double- declining-balance, and (3) activity-based. (Do not round your intermediate calculations.) Depreciation Expense (1) Straight-line (2) Double-declining-balance (3) Activity-based

Explanation / Answer

(1) Straight-line

Depreciation expense = ($19,000 - $1,900)/4 = $4,275

(2) Double-declining-balance

Depreciation expense = $19,000 × 2/4 = $9,500

(3) Activity-based

Depreciation expense = [($19,000 - $1,900)/18,000 hours] × 2,400 hours = $2,280

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