Gaub Corporation purchased a machine at a total cost of $ 400,000. As the accountant for the

Question:

Gaub Corporation purchased a machine at a total cost of $ 400,000. As the accountant for the company, you estimated a useful life of seven years or 25,000 hours of operation, with a salvage value of $ 50,000. The president of the company wants to know what impact this capital expenditure will have on income over the next seven years. (Assume the computer is used 4,000 hours the first year and that its usage increases 10 percent in each succeeding year.)

Required:

A. Prepare a schedule showing the depreciation expense and year-end carrying value of the asset for each of the next four years under each of the following methods of depreciation:

1. Straight-line method

2. Units-of-production method

3. Double-declining-balance method

B. Why would management select one method over another?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...