Reference no: EM132380080
Question
Niles Construction Company purchased a new crane for 350,000 at the beginning of year 1. The crane has an estimated residual value of 40,000 and an estimated useful life of six years. The crane is expected to last 10,000 hours . It was used 1,800 hours in year 1; 2,000 hours in year 2; 2,500 hours in year 3; 1,500 hours in year 4; 1,200 hours in year 5; and 1,000 hours in year 6.
REQUIRED
Compute the annual depreciation and carrying value for the new crane for each of the six years (round to the nearest dollar where necessary) under each of the following methods:
straight-line,production, and
double-declining-balance (round percentage to two decimal places).
If the crane is sold for after year 3, what would be the amount of gain or loss under each method?
ACCOUNTING CONNECTION Do the three methods differ in their effect on the company's profitability? Do they differ in their effect on the company's operating cash flows? Explain.