Calculate and analyze depreciation under alternative methods. (LO 2)
On January l, 2007, the Oviedo Manufacturing Company purchased equipment for $170,000. The estimated useful life of the equipment is 4 years, and the estimated salvage value is $10,000. The company expects the equipment to produce 480,000 units during its service life. Actual units produced were:
| Year | Units |
| 2007 | 100,800 |
| 2008 | 130,080 |
| 2009 | 139,200 |
| 20to | 109,920 |
a. Calculate the depreciation expense for each year of the 4-year life of the equipment using
1. Straight-line method
2. Double-declining balance method
3. Activity method (Round your answers to the nearest dollar.)
b. How does the choice of depreciation methods affect net income in each of the years? How does the choice of depreciation methods affect the balance sheet in each of the years?
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