On January 1 2016 SugarBear Company acquired equipment costing 150 000
On January 1, 2016, SugarBear Company acquired equipment costing $150,000, which will be depreciated on the assumption that the equipment will be useful for five years and have a residual value of $12,000. The estimated output from this equipment is as follows:
2016—15,000 units
2017—24,000 units
2018—30,000 units
2019—28,000 units
2020—18,000 units
The company is now considering possible methods of depreciation for this asset.
a. Calculate what the depreciation expense would be for each year of the asset’s life, if the company chooses:
i. The straight-line method
ii. The units-of-production method
iii. The double-diminishing-balance method
b. Briefly discuss the criteria that a company should consider when selecting a depreciation method.
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