On April 22, 2013, Sandstone Enterprises purchased equipment for $129,200. The company expects to use the equipment
Question:
On April 22, 2013, Sandstone Enterprises purchased equipment for $129,200. The company expects to use the equipment for 12,000 working hours during its four-year life and that it will have a residual value of $14,000. Sandstone has a December 31 year end and pro-rates depreciation to the nearest month. The actual machine usage was: 1,900 hours in 2013; 2,800 hours in 2014; 3,700 hours in 2015; 2,700 hours in 2016; and 1,100 hours in 2017.
Instructions
(a) Prepare a depreciation schedule for the life of the asset under each of the following methods:
1. Straight-line,
2. Diminishing-balance using double the straight-line rate, and
3. Units-of-production.
(b) Which method results in the lowest profit over the life of the asset?
(c) Which method results in the least cash used for depreciation over the life of the asset?
Step by Step Answer:
Accounting Principles Part 2
ISBN: 978-1118306796
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow