On January 1, 2011, the Peninsula Paper Company purchased manufacturing equipment for $600,000. The equipment has a 4-year estimated useful life and a salvage value of $22,500. The company expects to use the equipment for 275,000 hours

Actual hours the equipment was used are provided in the table below:

Year Hours
2011 40,000
2012 95,000
2013 80,000
2014 60,000

Required: Calculate the depreciation expense for each year of the asset's life using:
1. the straight-line method,
2. the double-declining balance method, and
3. the activity (units-of-production) method.

1. Straight-line method
Year Depreciation expense
2011 $144,375 = ($600,000 - 22,500) / 4 years
2012 $144,375
2013 $144,375
2014 $144,375

2. Double-declining balance method
Year Depreciation expense
2011 $300,000 = (2/4) x $600,000
2012 $150,000 = (2/4) x $300,000
2013 $ 75,000 = (2/4) x $150,000
2014 $ 52,500 = $75,000 book value - $22,500 salvage value

3. The activity (units-of-production) method
($600,000 — 22,500) / 275,000 hours = $2.10 per hour
Year Depreciation expense
2011 $84,000 = 40,000 hours @ $2.10
2012 $199,500 = 95,000 hours @ $2.10
2013 $168,000 = 80,000 hours @ $2.10
2014 $126,000 = 60,000 hours @ $2.10