Question - Suppose the Colorado Avalanche purchased a new Zamboni machine to scrape the ice off the rink between periods. The Zamboni cost $100,000 and has a useful life of three years and a residual value of $5,000 when it is sold to a minor league hockey team. The Zamboni is anticipated to drive 352 miles the first year, 375 miles the second year, and 435 miles the third year when the team anticipates winning the Stanley Cup.
Required:
1. Compute the first years depreciation using the following methods:
a. Straight-line
b. Double-declining balance
c. Units-of-production method.
2. Which method do you think is the most representative of accurate depreciation of the Zamboni?