Lawnmowing Limited has purchased a group of new lawnmowers for $20 000. The owner expects the mowers to last five years and to have negligible resale value at that point. The business plan projects cutting 5000 lawns over the five years, with per-year projections of 500, 1000, 1200, 1800 and 500 lawns over the five years. 

1. Calculate the accumulated depreciation balance at the end of the second year using each of the following depreciation bases: 

a. Straight-line 

b. Reducing balance (25 per cent rate) 

c. Units-of-production. 

2. Based on your calculations, which depreciation basis would produce the highest retained profits at the end of the second year? 

3. If the 25 per cent reducing balance method is used, accumulated depreciation will be $15 254 at the end of the fifth year. Suppose that, on the first day of the sixth year, all the lawnmowers are sold as junk for $100 cash in total. Ignoring income taxes, calculate the loss on sale that would be recorded that day.