Daniel’s Cement Company purchased new cement pouring equipment at a cost of $22,500 at the beginning of July 2009. The equipment was estimated to have a salvage value of $2,500 at the end of its useful life of five years. Equipment like this is supposed to deliver 250,000 hours of service. The actual number of hours that the equipment was used per year is as follows:
Year Ended Hours
June 30, 2010 ....... 44,000
June 30, 2011 ....... 50,000
June 30, 2012 ....... 39,000
June 30, 2013 ....... 57,000
June 30, 2014 ....... 60,000

1. Calculate the depreciation expense for each year of the five-year life of the cement pouring equipment using the following methods:
a. Straight-line method
b. Activity method
c. Double-declining balance method
2. How does the choice of depreciation method affect net income in each of the years?
3. How does the choice of depreciation method affect the balance sheet in each of the years?

  • CreatedSeptember 01, 2014
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