In: Accounting
On Jan 3, 2017, Limestone Enterprises purchased equipment for $134,500. The equipment has a useful life of five years or of 15,000 working hours and after the useful life it will have a residual value of $12,000. The machine was used for 1,400 hours in 2017, 2,100 hours in 2018; 3,700 hours in 2019.
Required:
1. Calculate the depreciation expense for 2017 and 2018 under each of the following methods:
i. Straight-line,
ii. Double diminishing-balance, and
iii. Units-of -production
2. Record the journal entry for depreciation expense for the year ended December 31, 2017 under the straight-line method.
Which method results in the lowest profit for the first two years? Why?