On Jan 2, 2017, Sandstone Enterprises purchased equipment for $129,200. The equipment has a useful life of four years or of 12,000 working hours and after the useful life it will have a residual value of $14,000. The machine was used for 1,900 hours in 2017, 2,800 hours in 2018; 3,700 hours in 2019.

Required:

1. Calculate the depreciation expense for 2017 and 2018 under each of the following methods: (15 marks)

1. Straight-line,
2. Double diminishing-balance, and
3. Units-of -production

2. Record the journal entry for depreciation expense for the year ended December 31, 2017 under the straight-line method. (2 marks)
3. Which method results in the lowest profit for the first two years? Why? (3 marks)