Choosing the method of depreciation with 30% tax rate, straight line or double declining depreciation.
The Capital Company purchased 3 machines in the past year. Information regarding these items is listed below:
|
Machine
|
Acquired
|
Cost
|
Salvage Value
|
Useful life
|
Depreciation Method
|
|
1
|
Jan 1, 2006
|
$120,000
|
$20,000
|
5 years
|
Straight-line
|
|
2
|
Jan 1, 2006
|
80,000
|
10,000
|
5 years
|
Double-declining
|
|
3
|
Sept 1, 2006
|
530,000
|
5,000
|
4 years
|
Units of production
|
Additional information: The total machine hours expected for machine 3 will be 12,000 hours. Actual machine hours used in the first three years were: 200 hours in 2006, 2,250 hours in 2007, and 2,500 hours in 2008
i) The Straight-line depriciation method.
ii) The Double-declining depriciation method.