On 1 January 20X5, Lee Company, a tool manufacturer, acquired new industrial equipment for $ 2 million. The new equipment had a useful life of four years, and the residual value was estimated to be $ 220,000. Vello estimates that the new equipment can produce 20,000 tools in its first year.
Production is then estimated to decline by 2,000 units per year over the remaining useful life of the equipment. The following depreciation methods are under consideration:
a. Declining- balance (50% rate)
b. Straight- line c. Units- of- output
Which depreciation method would result in maximum income for Financial statement reporting for the three- year period ending 31 December 20X7? Prepare a schedule showing the amount of accumulated depreciation at 31 December 20X7, under each method selected. Show supporting computations in good form.