On July 1, 2016, Silver Stone Company purchased equipment for a cost of $450,000 with an expected useful life of 10 years and an anticipated residual value of $30,000. For the year 2017 (the second year of the equipment’s life), Silver Stone reported sales of $1,500,000 and operating expenses other than depreciation of $1,050,000. Silver Stone has a December 31 year end.
Required:
a. Assuming Silver Stone uses straight-line depreciation, what amount of income before income taxes will it report for 2017?
b. If Silver Stone had used double-diminishing-balance depreciation (in both 2016 and 2017), what amount of income before income taxes would it have reported for 2017?
c. For what type of assets is it appropriate to use double-diminishing-balance depreciation?