Question - Sanders Construction Co. specializes in building replicas of historic houses. Brett Sanders, president of Sanders Construction, is considering the purchase of various items of equipment on July 1, 2014 for $300,000. The equipment would have a useful life of 5 years and no residual value. Brett is considering depreciating the equipment by the straight-line method or the double declining balance method.
1. Calculate the depreciation for the first year using the straight-line method and the Double declining balance method, show your work.
2. In a short paragraph, explain the straight-line depreciation method and the Double declining balance method.
3. In your opinion, which method would be better for the company to use, why? Explain your answer.