Kurtis Koal Company, Inc. purchased a new mining machine at a total cost of $ 900,000 on the first day of its fiscal year. The firm estimates that the machine has a useful life of six years or 6,000,000 tons of coal and a residual value of $ 60,000 at the end of its useful life. The following schedule indicates the actual number of tons of coal mined with the machine per year:
Year Tons of Coal
1 …………………. 700,000
2 …………………. 1,400,000
3 …………………. 1,600,000
4 …………………. 1,000,000
5 …………………. 750,000
6 …………………. 550,000
Prepare the depreciation schedules for the machine assuming that Kurtis Koal used the following methods (each case is independent):
a. Straight- line method
b. Units- of- output method
c. Double- declining balance method (Adjust the depreciation expense in the last year to the necessary amount to arrive at an ending book value equal to the scrap value.)
d. Kurtis Koal sells the mining machine for $ 450,000 at the end of year 3. What is the gain or loss on sale under each of the depreciation methods in parts ( a)–( c) above?