Your company just replaced its high-end CNC machine at a cost of $120,000. It will have a useful life of 10 years and a salvage value of $30,000. However, the company may decide to sell it before the end of its’ useful life. Therefore, they want to maximize the depreciation expense.
a) If they begin using the SOYD method and want to maximize the total depreciation expense, and therefore switch to the SL method at the appropriate time, in which year should they switch to the SL method?
b) Assuming they switch from the SOYD method to the SL method what is the total accumulated depreciation at the end of year 8 and the book value of the machine at that time?