# Kate Company purchased a tractor at a cost of $120,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2016 and was used 2,400 hours in 2016 and 2,100 hours in 2017. What method of depreciation will produce the maximum depreciation expense in 2017

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###### Question:

Kate Company purchased a tractor at a cost of $120,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2016 and was used 2,400 hours in 2016 and 2,100 hours in 2017. What method of depreciation will produce the maximum depreciation expense in 2017

## Answers

Options :A) Straight-lineB) Units-of-productionC) Double-declining-balanceD) All methods produce the same expense in 2017Answer:C.) Double declining balance Explanation:Given the following:Cost of tractor = $120,000Salvage value = $20,000Estimated life = 8 years or 12000 hours of operation Purchase date = January 1, 20162016 usage = 2400 hours 2017 usage = 2100 hours Depreciation Expense :Using the straight line Depreciation :(120,000 - 20,000) / 8 = 100,000 / 8 = $12,500Double declining balance :(100%)/8 = (0.125) * 2 = 0.250.25 * 120,000 = 30,000Unit of production:(120,000 - 20,000) * (2100 / 12,000)= 100,000 * 0.175 = $17500

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