A company purchased a computer on July 1,2012.The computer has an estimated useful life of 5 years and will have no salvage value.It was purchased for $10,000.It is estimated that the computer can be used for 5,000 hours.The computer was used for 450 hours during 2012.If the goal is to record higher depreciation expense in the earlier years,which method should be used?

Question

Quizplus · Accepted Answer

The double-declining-balance method will result in higher depreciation expenses in the earlier years because it applies a higher depreciation rate to the asset's book value. This method is better suited for assets that have a higher expected rate of depreciation in the early years of their useful life, which is consistent with the goal stated in the question. The units-of-production method would be better suited in situations where usage or output is a more accurate representation of an asset's wear and tear, but this is not the case for a computer. The straight-line and First-In, First-Out methods do not consider usage or output and would not result in higher depreciation expenses in the earlier years.

A Company Purchased a Computer on July 1,2012