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.
Required:
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.