Depreciation Methods The Winsey Company purchased equipment on January 2, 2007 for $700,000. The equipment has the following characteristics:
|
Estimated service life |
20 years |
Estimated residual value |
$50,000 |
|
100,000 hours |
|||
|
950,000 units of output |
During 2007 and 2008, the company used the machine for 4,500 and 5,500 hours, respectively, and produced 40,000 and 60,000 units, respectively.
Required
Compute the depreciation for 2007 and 2008 under each of the following methods:
1. Straight line
2. Hours worked
3. Units of output
4. Sum of the years’ digits
5. Double declining balance
6. 150% declining balance
7. Compute the company’s return on assets for each method for 2007 and 2008, assuming that income before depreciation is $100,000. For simplicity, use ending assets, and ignore interest, income taxes, and other assets.