On June 30, 2016 Hendrix Inc. purchased a new piece of equipment for $200,000. This equipment has a useful of 4 years with no salvage. Assume a calendar year operation for Hendrix Inc.
1. If Hendrix adopted a straight line depreciation method for this new equipment, then what is the depreciation expense for Hendrix in 2016?
2. If Hendrix adopted a straight line depreciation method for this new equipment then what is the depreciation expense for Hendrix in 2017?
3. If Hendrix adopted a double declining balance method for depreciation then what would the depreciation expense for years (2016 and (2017)?
4. Explain why depreciation is added back to net income on the statement of cash flow when Hendrix's elects to present this statement under the indirect method.