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 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013.
-Refer to Fabian Woodworks.Based on the information presented above,what method of depreciation will maximize depreciation expense in 2012?

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation results in higher depreciation expenses in the early years of an asset's life, which is what is desired in this case as the company wants to maximize depreciation expense in 2012. The straight-line method would result in equal depreciation expense over the life of the asset, and the units-of-production method would result in depreciation expense based on actual usage, which may not necessarily maximize depreciation expense in 2012. Therefore, the best choice is double-declining-balance method.

Fabian Woodworks This Company Purchased a Truck at a Cost