Question - Atwell Company purchased machinery on January 1, 2017, at a cost of $270,000. The estimated useful life of the machinery is 5 years, with an estimated salvage value at the end of that period of $20,000. The company is considering different depreciation methods that could be used for financial reporting purposes.
Instructions
(a) Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.
(b) Compare and contrast the effect of the 2 methods on net income for each of the 5 years the machinery will be depreciated.
(c) Which method do you recommend and why?