On January 2, 2015, Yuki Sporting Goods Ltd. purchased branding equipment at a cost of $63,000. Before placing the equipment in service, the company spent $2,200 for delivery, $4,000 to customize the equipment, and $800 for installation. Management estimates that the equipment will remain in service for six years and have a residual value of $16,000. The equipment can be expected to brand 18,000 pieces in each of the first four years and 14,000 pieces in each of the next two years. In trying to decide which depreciation method to use, George Yuki requests a depreciation schedule for each method (straight-line, units-of-production, and double-diminishing-balance).
Requirements
1. Prepare a depreciation schedule for each of the depreciation methods listed, showing asset cost, depreciation expense, accumulated depreciation, and asset carrying amount.
2. Yuki Sporting Goods reports to its banker in the financial statements using the depreciation method that maximizes reported income in the early years of asset use. Consider the first year that Yuki Sporting Goods uses the equipment. Identify the depreciation method that meets the company's objectives. Explain your choice?