Which method results in the lowest profit over the life

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Question :

On April 22, 2016, Sandstone Enterprises purchased equipment for $129,200. The company expects to use the equipment for 12,000 working hours during its four-year life and that it will have a residual value of $14,000. Sandstone has a December 31 year end and pro-rates depreciation to the nearest month. The actual machine usage was: 1,900 hours in 2016; 2,800 hours in 2017; 3,700 hours in 2018; 2,700 hours in 2019; and 1, 100 hours in 2020.

Instructions

(a) Prepare a depreciation schedule for the life of the asset under each of the following methods:

1. straight-line,

2. double diminishing-balance, and

3. units-of-production.

(b) Which method results in the lowest profit over the life of the asset?

(c) Which method results in the least cash used for depreciation over the life of the asset?

Reference no: EM132406733

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