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.

Straight line depreciation expense = $4,275

double- declining-balance = $9500

Activity based = $2,280

Explanation:

Straight line depreciation expense = ( Cost of asset - Salvage value) / useful life

Cost of asset = $19,000

Salvage value = $1900

Useful life = 4 years

($19,000 - $1900) / 4 = $4,275

The straight line depreciation method allocates the same deprecation expense for each year of the useful life of the asset.

The deprecation expense for The first year would be $4,275

Double declining method = Depreciation factor x cost of asset

Deprecation factor = 2 x (1/useful life)

2 x (1/4) = 0.5

0.5 x $19,000 = $9500

Activity based =( machine hours for the year/ total estimated machine hours) × (cost of asset - Salvage value)

(2,400 / 18,000) × ($19,000 - $1,900) = $2,280

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