Problem
Miles Company purchased a machine on January 1, 2014, by paying cash of $400,000. The machine has an estimated useful life of five years, is expected to produce 500,000 units, and has an estimated residual value of $40,000.
A. Calculate depreciation expense to the nearest whole dollar for each year of the machine's useful life under
1. Straight-line depreciation method.
2. Double declining-balance method.
B. What is the book value of the machine after three years using the double declining-balance method?
C. What is the book value of the machinery after three years using the straight-line method?
D. If the machine was used to produce and sell 140,000 units in 2014, what would be the depreciation expense using the units-of-production method?