An item of equipment was purchased on 1 July 2008 at a cost of $625 000. It was estimated to have a useful life of four years and a salvage value at the end of that period of $25 000.

1. Calculate the depreciation expense that would be charged with respect to this equipment in each of the years ending 30 June 2013, 2014, 2015 and 2016 using:

a. The straight-line method

b. The reducing balance method (use 40 percent rate).

2. Outline the main factors to be considered in selecting an appropriate depreciation method.