Daniels Cement Company purchased new cement pouring equipment at a cost of $22,500 at the beginning of

Question:

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 EndedHours

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

Requirements

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?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...