Niles Construction Company purchased a new crane for350,000at the beginning of year 1. The crane has an estimated residual value of 40,000and an estimated useful life of six years. The crane is expected to last 10,000 hours. It was used 1,800 hoursin year 1; 2,000 hoursin year 2;2,500 hoursin year 3;1,500 hoursin year 4;1,200 hoursin year 5; and1,000 hoursin year 6.

REQUIRED

1. Compute the annual depreciation and carrying value for the new crane for each of the six years (round to the nearest dollar where necessary) under each of the following methods:

straight-line,

production, and

double-declining-balance (round percentage to two decimal places).

1. If the crane is sold forafter year 3, what would be the amount of gain or loss under each method?
2. ACCOUNTING CONNECTIONDo the three methods differ in their effect on the company's profitability? Do they differ in their effect on the company's operating cash flows? Explain.