On January 1, 2012, Scout Manufacturing purchased new equipment for $145,000. The equipment was estimated to have a five-year useful life and a salvage value of $15,000. Scout estimates that the equipment will produce 81,250 units over its useful life. However, it actually produces 18,000 units in 2012, 17,500 units in 2013, 17,750 units in 2014, 17,000 units in 2015, and 15,000 units in 2016.
a. Prepare a depreciation schedule for Scout for each of the five years using the straight-line method, the double-declining-balance method, and the units-of-activity method.
b. Assuming a tax rate of 30%, how much more could Scout defer in taxes in the first year by using the double-declining-balance method versus the straight-line method?