Response to the following problem:
The Pablo Paving Company purchased a new bulldozer for $ 250,500 at the beginning of Year 1. It is estimated that the residual value will be 25,000 and have a useful life of 6 years. The Bulldozer is expected to last 10,000 hours. In year 1 it was used 1,800 hours, in year 2 it was used 2000 hours; year 3, 2,500 hours; 1,500 hours in year 4; 1,200 hours in year 5; and 1,000 hours in year 6.
Required:
1) Compute the annual depreciation and carrying value for the new crane for each of the 6 years under each of the following methods: a) Straight-line, b) production, c) double declining- balance. Round percentage to 2 decimal places (for example, like this: 22.22 %).
2) If the crane is sold for $ 250,000 at the end of year 3, what is the gain/loss under each of the three methods?
3) How does each method affect the firm's profitability? Please explain this as clearly as possible.
Attachment:- Format-Method of Depreciation.doc