Reference no: EM132794785

Problem 1: Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. What amount will Norwood, Inc. report as depreciation expense over the eight-year life of the equipment?

Option 1: $60,000
Option 2: $75,000
Option 3: $80,000
Option 4: $72,000

Problem 2: Barnhill, Inc. uses straight-line depreciation for its equipment with an estimated useful life of ten years and zero residual value. The CEO points out that the equipment will last much longer than ten years, perhaps up to 20 years. What is the impact on earnings per share and net income of depreciating equipment over 20 years rather than ten years?

Option 1: Earnings per share will increase and net income will decrease.
Option 2: Earnings per share will decrease and net income will increase.
Option 3: Both earnings per share and net income will increase.
Option 4: Both earnings per share and net income will decrease.