Amortization. Canadian Toy Industries Ltd. Purchased equipment at the beginning of the year for $173,000. The equipment will be used by the company for an estimated useful life of 8 years or 200,000 hours. It is estimated that the equipment will have a residual value of $13,000. The accounting department is undecided as to which amortization method would be most appropriate for this asset. The methods being considered are: straight line, units of production, and declining balance at twice the straight line rate. The equipment was used for 11,000 hours during the first year of operation. Determine the amortization expense for the first year assuming.
(a) The company objective of financial reporting is to maximize profits
(b) The company wishes to publish conservative financial statements
This is a solution to a two-part short answer accounting problem involving Depreciation, and Amortization for Canadian Toy Industries, a fictitious company.