Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 46

Computing Depreciation under Alternative Methods
Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. The estimated useful life was five years, and the residual value was $2,000. Assume that the estimated productive life of the machine is lO.OCO units. Expected annual production was: year 1, 2,000 units; year 2, 3,000 units; year 3, 2,000 units; year 4, 2,000 units; and year 5, 1,000 units.
Required:
1. Complete a depreciation schedule for each of the alternative methods. Round answers to the nearest dollar.
a. Straight-line.
b. Units-of-production.
c. Double-declining-balance.

2. Which method will result in the highest net income in year 2 Does this higher net income mean the machine was used more efficiently under this depreciation method