Piper Corporation purchased machinery on January 1, 2012, at a cost of $280,000. The machinery's estimated useful life is five years, with a residual value of $10,000. The company is considering which depreciation method to use for financial reporting purposes.

Instructions

(a) Prepare separate depreciation schedules for the life of the machinery using the straight-line and double diminishing- balance methods.

(b) Which method would result in the higher profit for 2012? In the higher total profit over the five-year period?

(c) Which method would result in the higher carrying amount at the end of 2012? In the higher carrying amount at the end of the five-year period?

(d) Which method would result in the higher cash flow for 2012? In the higher total cash flow over the five-year period?

(e) What factors should management consider when deciding on the appropriate depreciation method?