The Winsey Company purchased equipment on January 2, 2010, for $700,000. The equipment has the following characteristics:Estimated service life ……… 20 years 100,000 hours950,000 units of outputEstimated residual value ……. $50,000During 2010 and 2011, the company used the machine for 4,500 and 5,500 hours, respectively, and produced 40,000 and 60,000 units, respectively.RequiredCompute the depreciation for 2010 and 2011 under each of the following methods:1. Straight-line2. Hours worked3. Units of output4. Sum-of-the-years’-digits5. Double-declining-balance6. 150%-declining-balance7. Compute the company’s return on assets (net income divided by average total assets, as discussed in Chapter 6) for each method for 2010 and 2011, assuming that income before depreciation is $100,000. For simplicity, use ending assets, and ignore interest, income taxes, and other assets.View Solution:
The Winsey Company purchased equipment on January 2 2010 for

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