Reference no: EM132794781
Problem 1: Wind Chime Co. and Fire Hut Co. each purchased identical equipment having an estimated useful life of ten years for the same price. Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?
a. Fire Hut's equipment's book value will be less than Wind Chime's equipment's book value at the end of Year 2.
b. Wind Chime's depreciation expense will be greater in Year 1 than Fire Hut's depreciation expense.
c. Wind Chime's net income will be greater than Fire Hut's net income in Year 9.
d. Fire Hut's equipment's book value will be greater than Wind Chime's equipment's book value at the end of Year 1.
Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018.
Problem 2: Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017?
a. Units-of-production
b. Double-declining-balance
c. Straight-line
d. All methods produce the same expense in 2017.
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What amount will Norwood Inc report as depreciation expense
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