Super Saver Groceries purchased store equipment for $35,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 10,000 hours. Super Saver used the equipment for 1,700 hours the first year

Required: Calculate depreciation expense of the equipment for the first year, using each of the following methods. (Do not round your intermediate calculations.)

1. Straight-line. Depreciation expense

2. Double-declining-balance. Depreciation expense

3. Activity-based. epreciation expense

The results are below.

Explanation:

Giving the following information:

Purchasing price = $35,500

Useful life = 10 years

Salvage value = $3,500

The company expects to use the equipment for a total of 10,000 hours. Super Saver used the equipment for 1,700 hours the first year

1) Straight-line method:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (35,500 - 3,500) / 10

Annual depreciation = $3,200

2) Double-declining balance:

Annual depreciation = 2*[ (book value) / estimated life (years) ]

Annual depreciation = 2*3,200

Annual depreciation = $6,400

3) Activity-based:

Annual depreciation = [ (original cost - salvage value) / useful life of production in hours]*hours operated

Annual depreciation = (32,000/10,000) * 1,700

Annual depreciation = $5,440