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Over what period should hilite depreciate the equipment

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Question - Equipment was acquired on 1 July 2010 for $50,000 by HiLite Ltd. Its life was determined as being:

Useful = 5yre

Economic = 8yre

Physical = 10yre

The estimated residual values at the end of these respective periods are:

After yrs = $20,000

After 8yre = $4,000

After10yre = NIL

(a) Over what period should HiLite depreciate the equipment?

(b) Would the depreciation expense for the year 2012 be greater if HiLIte uses the straight-line method or the reducing-balance method?

(c) On what basis should management select a depreciation method for equipment?

(d) "Costs are always expenses" Do you agree?

Reference no: EM131734172

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