On January 5, 2014, Paige Construction purchased a used crane at a total cost of $200,000. Before placing the crane in service, Paige spent $12,500 transporting it, $4,800 replacing parts, and $11,400 overhauling the engine. Karen Paige, the owner, estimates that the crane will remain in service for four years and have a residual value of $42,000. The crane's annual usage is expected to be 2,400 hours in each of the first three years and 2,200 hours in the fourth year. In trying to decide which amortization method to use, Mary Blundon, the accountant, requests an amortization schedule for each of the following generally accepted amortization methods: straight-line, UOP, and DDB.
Required
1. Assuming Paige Construction amortizes this crane individually prepare an amortization schedule for each of the three amortization methods listed, showing asset cost, amortization expense, accumulated amortization, and asset book value. Assume a December 31 year end.
2. Paige Construction prepares financial statements for its bankers using the amortization method that maximizes reported income in the early years of asset use. Identify the amortization method that meets the company's objective.