QUESTION 4

On January 1, 2012, Morrow Inc. purchased a spooler at a cost of $40,000. The equipment is expected to last eight years with a residual value of $4,000. During its eight-year life, the equipment is expected to produce 250,000 units of product. In 2012 and 2013, 42,000 and 76,000 units respectively were produced.

Required:

Compute the depreciation expense for 2012 and 2013 and the book value of the spooler at December 31,

2012 and 2013, assuming:

A) the straight-line method is used,

B) the double-declining-balance method is used,

C) the sum-of-the-years'-digits method is used, and

D) the units-of-production is used.