Feng Company purchased a machine for $180,000 on September 1, 2011. It is estimated that the machine

Question:

Feng Company purchased a machine for $180,000 on September 1, 2011. It is estimated that the machine will have a 10-year life and a salvage value of $18,000. Its working hours and production in units are estimated at 36,000 and 750,000, respectively. It is the company’s policy to depreciate assets for the number of months they are held during a year. During 2011, the machine was operated 1,500 hours and produced 21,000 units. Which of the following methods will give the greatest depreciation expense for 2011:

(1) Double-declining-balance

(2) Sum-of-the-years’-digits,

(3) Productive-output, or

(4) Service-hours?

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...