Grover,Inc. Grover,Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years,or 12,500 hours of operation.The crane was purchased on January 1,2013 and was used 2,700 hours in 2013 and 2,600 hours in 2014.
Refer to the information for Grover,Inc,
Based on this information,what method of depreciation will produce the maximum depreciation expense in 2014?

Question

Quizplus · Accepted Answer

Units-of-production method of depreciation would produce the maximum depreciation expense in 2014 as it takes into account the actual usage of the crane during the year. Since the hours of operation were higher in 2013 than in 2014, the straight-line depreciation method, which assumes equal annual depreciation expense, would not result in the maximum depreciation expense in 2014. Moreover, the double-declining-balance method would result in higher depreciation expense in the initial years, but it would not necessarily result in the maximum depreciation expense in 2014.