Wellness Medical Center bought equipment on January 2, 201 2, for $24,000. The equipment was expected to remain in service for 4 years and to perform 700 operations. At the end of the equipment’s useful life, Wellness estimates that its residual value will be $3,000. The equipment performed 70 operations the first year, 210 the second year, 280 the third year, and 140 the fourth year.

Requirements

1. Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under double-declining-balance depreciation, the company switched to the straight-line method. Show your c omputations.

2. Which method tracks the wear and tear on the equipment most closely?

3. Which method would Wellness prefer to use for income-tax purposes in the first years of the equipment’s life? Explain in detail why a taxpayer prefers this method.