Fabian Woodworks
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of five years, or 100,000 hours of operation. The truck was purchased on January 1, Year 1, and was used for 27,000 hours in Year 1 and 26,000 hours in Year 2.
-Based on the information presented in the figure Fabian Woodworks,which method of depreciation will maximize depreciation expense in Year 2?

Question

Quizplus · Accepted Answer

The double-declining-balance method would maximize depreciation expense in Year 2 because it results in higher depreciation expense earlier in the asset's life. This method applies a constant rate to the book value of the asset, resulting in larger depreciation expense in earlier years compared to the straight-line method. The units-of-production method would also be a valid option since it takes into account the hours of operation, but the information provided in the question does not give a clear indication of the expected usage for the remaining years of the asset's life. Therefore, the double-declining-balance method is the best choice.

Fabian Woodworks This Company Purchased a Truck at a Cost of $12,000