Dougan Company purchased equipment on January 1, 2014 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Answer the following independent questions.
1. Compute the amount of depreciation expense for the year ended December 31, 2014, using the straight-line method of depreciation.
2. Compute the amount of depreciation expense for the year if 16,000 units of product are produced in 2014 and
3. 24,000 units are produced in 2015 assuming the company uses the units-of-activity depreciation method.
4. If the company uses the double-declining-balance method of depreciation, what is the depreciation expense for the first three years (2014 – 2016)?