Play Hard Fitness Center is a chain of work-out facilities. Play Hard's financial analysts have forecasted sales to remain at a constant level for the next three years, but income taxes are forecasted to grow by 5% a year for the next five years. Play Hard is about to refurnish 50% of its centers with new equipment that will have an estimated useful life of five years. As a CPA, you know that companies can use one method of depreciation for tax purposes and another for book purposes. The two methods under consideration are the double declining-balance method and straight-line method of depreciation.
Required
Write a short memo recommending the method you would use for tax purposes and the method you would use for book purposes. Be sure to discuss the advantages and disadvantages of both of the methods as well as the associated effects on income, depreciation over time, cash flows, etc.