The White Swan Talc Company paid $120,000 for mining equipment for a small talc mine. The mining engineer's report indicates the mine contains 40,000 cubic meters of commercial-quality talc. The company plans to mine all the talc in the next 5 years as follows:
At the end of 5 years, the mine will be exhausted and the mining equipment will be worthless. The company accountant must now decide whether to use sum-of-years'-digits depreciation or unit-of-production depreciation. The company considers 8% to be an appropriate time value of money. Compute the depreciation schedule for each method. Which would you recommend? Show the computations to justify your decision.