On June 9, 2013, Blue Ribbon Company purchased manufacturing equipment at a cost of $345,000. Blue Ribbon estimated that the equipment will produce 600,000 units over its five-year useful life, and have a residual value of $15,000. The company has a December 31 fiscal year end and has a policy of recording a half year's depreciation in the year of acquisition.
Instructions
(a) Calculate depreciation under the straight-line method for 2013 and 2014.
(b) Calculate the depreciation expense under the diminishing-balance method using double the straight-line rate, for 2013 and 2014.
(c) Calculate the depreciation expense under the units-of-production method, assuming the actual number of units produced was 71,000 in 2013 and 118,600 in 2014.
(d) In this situation, what factors should the company consider in determining which depreciation method it should use?