Hadinoto Enterprises Inc.(HEI) purchased equipment
Hadinoto Enterprises Inc.(HEI) purchased equipment for $400,00 on January 1, 20x5.The equipment has a 4 year life and no salvage value.HEI estimates that the equipment will be used to produce the following units of inventory:
To maximize profit margin for 20x5, the depreciation method HEI will use is :
A.Straight-line
B.Units of production.
C.Double-declining balance.
参考解答
Ans:B.
The unit-of-production method will result in the lowest depreciation expense and therefore the highest profit margin in 20x5.20x5 depreciation is calculated as follows using the three methods:
Straight-line = $400,000/4years=$100,000
Double-declining balance = $400,000*(1/4)*2=$200,000
Units of production:
Depreciation rate = $400,000/1,000,000 units = $0.40 / unit
20x9 depreciation = $0.40/ unit * 100,000 units = $40,000
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