Benick Industries purchased a new lathe on January 1, 2011, for $300,000. Benick estimates that the lathe will have a useful life of four years and that the company will be able to sell it at the end of the fourth year for $60,000.
a. Compute the depreciation expense that Benick Industries would record for 2011, 2012, 2013, and 2014 under each of the following methods:
(1) Straight-line depreciation
(2) Double-declining-balance depreciation
b. If you were the president of Benick Industries, what might you consider when choosing a depreciation method for financial reporting purposes? Why?
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