Problem 9-4 Comparison of Depreciation Methods

Italian Construction Company purchased a new crane for $360,500 at the beginning of year 1. The crane has an estimated residual value of $35,000 and an estimated useful life of six years. The crane is expected to last 10,000 hours. It was used 1,800 hours in year 1; 2,000 hours in year 2; 2,500 hours in year 3; 1,500 hours in year 4; 1,200 hours in year 5; and 1,000 hours in year 6.

1. Compute the annual depreciation and carrying value for the new crane for each of the six years under each of the following methods. When calculating the rate for double-declining-balance, round the percentage to two decimal places, like 16.67% or 33.33%. Round your answers to the nearest whole dollar.

a. Straight-line:

	Depreciation	Carrying value
Year 1:	$	$
Year 2:	$	$
Year 3:	$	$
Year 4:	$	$
Year 5:	$	$
Year 6:	$	$

b. Production:

	Depreciation	Carrying value
Year 1:	$	$
Year 2:	$	$
Year 3:	$	$
Year 4:	$	$
Year 5:	$	$
Year 6:	$	$

c. Double-declining-balance:

	Depreciation	Carrying value
Year 1:	$	$
Year 2:	$	$
Year 3:	$	$
Year 4:	$	$
Year 5:	$	$
Year 6:	$	$

2. If the crane is sold for $250,000 after year 3, what would be the amount of gain or loss under each method?

a. Straight-line:	$
b. Production:	$
c. Double-declining-balance:	$