Hansen Supermarkets purchased a radio frequency identification (RFID) system for one of its stores at a cost of $190,000. Hansen determined that the system had an expected life of 8 years (or 50,000,000 items scanned) and an expected residual value of $12,000.
Required:
1. Determine the amount of depreciation expense for the first and second years of the system's life using the (a) straight-line and (b) double-declining-balance depreciation methods.
2. If the number of items scanned the first and second years were 6,100,000 and 5,600,000, respectively, compute the amount of depreciation expense for the first and second years of the system's life using the units-of-production depreciation method.
3. Compute the book values for all three depreciation methods as of the end of the first and second years of the system's life.
4. What factors might management consider when selecting among depreciation methods?