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Answer :
Therefore, the depreciation expenses for each year are as follows:
(a) Straight-Line Method:
Year 1: $26,063.33
Year 2: $26,063.33
Year 3: $26,063.33
Year 4: $26,063.33
(b) Units-of-Output Method:
Year 1: $14,894.00
Year 2: $28,434.00
Year 3: $24,372.00
Year 4: $12,719.60
(c) Double-Declining-Balance Method:
Year 1: $55,080.22
Year 2: $15,073.16
Year 3: $3,822.46
Year 4: $1,266.62
To calculate the depreciation expense for each year using different methods, we'll use the given information:
Equipment cost: $82,620
Useful life: 3 years or 5,940 operating hours
Residual value: $2,430
Hours of usage in each year: Year 1 = 1,100 hours, Year 2 = 2,100 hours, Year 3 = 1,800 hours, Year 4 = 940 hours
(a) Straight-Line Method:
The straight-line method allocates an equal amount of depreciation expense over the useful life of the equipment.
Depreciation Expense per Year = (Equipment Cost - Residual Value) / Useful Life
Year 1: (82,620 - 2,430) / 3 = $26,063.33
Year 2: (82,620 - 2,430) / 3 = $26,063.33
Year 3: (82,620 - 2,430) / 3 = $26,063.33
Year 4: (82,620 - 2,430) / 3 = $26,063.33
(b) Units-of-Output Method:
The units-of-output method allocates depreciation based on the actual usage of the equipment.
Depreciation Expense per Hour = (Equipment Cost - Residual Value) / Total Estimated Hours
Total Estimated Hours = 5,940 (useful life)
Year 1: (82,620 - 2,430) / 5,940 = $13.54 per hour
Depreciation Expense Year 1 = 1,100 hours * $13.54 = $14,894.00
Year 2: (82,620 - 2,430) / 5,940 = $13.54 per hour
Depreciation Expense Year 2 = 2,100 hours * $13.54 = $28,434.00
Year 3: (82,620 - 2,430) / 5,940 = $13.54 per hour
Depreciation Expense Year 3 = 1,800 hours * $13.54 = $24,372.00
Year 4: (82,620 - 2,430) / 5,940 = $13.54 per hour
Depreciation Expense Year 4 = 940 hours * $13.54 = $12,719.60
(c) Double-Declining-Balance Method:
The double-declining-balance method applies a constant rate of depreciation to the declining book value of the asset.
Depreciation Rate = 2 / Useful Life
Year 1: (82,620 - Accumulated Depreciation) * Depreciation Rate
Year 2: (82,620 - Accumulated Depreciation) * Depreciation Rate
Year 3: (82,620 - Accumulated Depreciation) * Depreciation Rate
Year 4: (82,620 - Accumulated Depreciation) * Depreciation Rate
Depreciation Rate = 2 / 3 = 0.6667
Year 1: (82,620 - 0) * 0.6667 = $55,080.22
Year 2: (82,620 - 55,080.22) * 0.6667 = $15,073.16
Year 3: (82,620 - 70,153.38) * 0.6667 = $3,822.46
Year 4: (82,620 - 73,975.84) * 0.6667 = $1,266.62
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