Note: Answer questions (2) - (5) based on the following information regarding the purchase of equipment.

Cost: $5,000

Salvage value: $1,000

Estimated useful life (in years): 4 years

Estimated useful life (in hours): 20,000

2) Under the straight line method of depreciation, what is the depreciation expense in the first year?

a) $ 250 c) $1,250

b) $1,000 d) $1,500

3) Under the straight line method of depreciation, what is the net book value at the end of the second year?

a) $1,000 c) $3,000

b) $2,000 d) $4,000

4) Under the double declining balance method, what would be the annual

depreciation rate?

a) 10% c) 40%

b) 25% d) 50%

5) Under the units of activity method, what would be the depreciation expense if the machine was used for 6,000 hours?

a) $ 600 c) $1,500

b) $1,200 d) $4,000