Options :
A) Straight-line
B) Units-of-production
C) Double-declining-balance
D) All methods produce the same expense in 2017
Answer:
C.) Double declining balance
Explanation:
Given the following:
Cost of tractor = $120,000
Salvage value = $20,000
Estimated life = 8 years or 12000 hours of operation
Purchase date = January 1, 2016
2016 usage = 2400 hours
2017 usage = 2100 hours
Depreciation Expense :
Using the straight line Depreciation :
(120,000 - 20,000) / 8 = 100,000 / 8 = $12,500
Double declining balance :
(100%)/8 = (0.125) * 2 = 0.25
0.25 * 120,000 = 30,000
Unit of production:
(120,000 - 20,000) * (2100 / 12,000)
= 100,000 * 0.175 = $17500
