Clear Window Cleaners
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
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Refer to the information provided for Clear Window Cleaners. Clear Window Cleaners wants to use the depreciation method that will result in the highest net income for 2011. Which method should be used?
A) Straight-line
B) Units-of-activity
C) Double-declining-balance
D) All methods create the same income in 2011.

Question

Clear Window Cleaners 
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
-
Refer to the information provided for Clear Window Cleaners. Clear Window Cleaners wants to use the depreciation method that will result in the highest net income for 2011. Which method should be used?
A) Straight-line
B) Units-of-activity
C) Double-declining-balance
D) All methods create the same income in 2011.

Quizplus · Accepted Answer

Units-of-activity depreciation will result in the highest net income for 2011 because it allocates more depreciation expense to the period of higher usage.