Problem:
Limestone Construction purchased a concrete mixer on July 15, 2011. Company officials revealed the following information regarding this asset and its acquisition:
Purchase price....................$210,000
Residual value...................................$20,000
Estimated useful life...................................9 years
Estimated service hours...................................50,000
Estimated production in units.......................................375,000 yards
The concrete mixer was operated by construction crews in 2011 for a total of 6,500 hours, and it produced 49,500 yards of concrete.
It is company policy to take a half-year's depreciation on all assets for which it used the straight-line or duble-decllining balance depreciation method in the year of purchase.
Calculate the resulting depreciation expense for 2011 under each of the following methods, and specify which method allows the greatest depreciation expense.
1) Double-declining balance
2) Productive output
3) Service hours
4) Straight-line.