Dexter Industries purchased packaging equipment on January 8 for $116,600. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,600. The equipment was used for 8,700 hours during Year 1, 7,380 hours in Year 2, and 3,920 hours in Year 3. Determine the amount of depreciation expense for the three years ended December 31 by (a) the double-declining-balance method. Also determine the total depreciation expense for the year by this method. (Note: For the Declining Balance, round the multiplier to five decimal places. Then round the answer for the year to the nearest whole dollar.)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Dexter Industries purchased packaging equipment on January 8 for $116,600. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $6,600. The equipment was used for 8,700 hours during Year 1, 7,380 hours in Year 2, and 3,920 hours in Year 3.
- Determine the amount of
depreciation expense for the three years ended December 31 by (a) the double-declining-balance method. Also determine the total depreciation expense for the year by this method. (Note: For the Declining Balance, round the multiplier to five decimal places. Then round the answer for the year to the nearest whole dollar.)
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