Question
1(a). Determine the equipments first-year depreciation under the straight-line method. 1(b). Determine the equipments first-year depreciation under the units-of-production method. Note: Actual units produced for
1(a). Determine the equipments first-year depreciation under the straight-line method. 1(b). Determine the equipments first-year depreciation under the units-of-production method. Note: Actual units produced for Year 1 were equal to the units estimated to be produced for Year 1. 1(c). Determine the equipments first-year depreciation under the double-declining-balance method. 2. Which method in part 1 results in the highest net income in the first year? 3. If the company anticipates that its use of assets will vary greatly from one year to the next based on usage, which method would we recommend the company use? 4. The founder is concerned that a depreciation method might result in more total depreciation expense over the useful life of an asset than another method. Which method would result in the highest amount of depreciation over an assets useful life?
Estimated Useful Life of Assets:
Building: 15 years
Equipment: 4 years
Truck: 6 years
Purchase Price and Estimated Salvage Value:
Building: Purchase price- $70,000 Salvage Price- $30,000
Equipment: Purchase Price- $40,000 Salvage Price- $10,000
Truck: Purchase Price- $30,000 Salvage price- $5,000
Acutal and Estimated Units-of-production:
Year one production (actual): 35,000 units
Year two production (estimated): 55,000 units
Year three production (estimated): 25,000 units
Year four production (estimates): 5,000 units
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