Calculate and analyze depreciation under alternative methods. (LO 2)
WTA Tennis Academy purchased a new ball machine at a cost of $18,000 at the beginning of January 2005. The machine was estimated to have a salvage value of $2,000 at the end of its useful life of 4 years. A machine like this is supposed to deliver 160,000 hours of service. The actual number of hours that the machine was used per year was:
|
Year |
Hours |
|
2005 |
40,000 |
|
2006 |
60,800 |
|
2001 |
39,200 |
|
2008 |
20,000 |
Required
a. Calculate the depreciation expense for each year of the 4-year life of the ball machine using
1. Straight-line method
2. Activity method
3. Double-declining method
b. How does the choice of depreciation methods affect income in each of the years?
c. How does the choice of depreciation methods affect the balance sheet in each of the years?