Saul Company purchased a tractor at a cost of $120,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2019 and was used 2,400 hours in 2019 and 2,100 hours in 2020.
What method of depreciation will produce the maximum depreciation expense in 2020?

Question

Quizplus · Accepted Answer

Straight-Line: ($120,000 - $20,000) / 8 = $12,500 per year
Double-declining balance: $120,000 × (1/8 × 2) = $30,000 for 2019
($120,000 - $30,000) × 1/4 = $22,500 for 2020
Units of production: ($120,000 - 20,000) × (2,100 hours / 12,000 hours) = $17,500 for 2020

Saul Company Purchased a Tractor at a Cost of $120,000