On January 1, Year 1, three companies purchased the same make and model copy machine. However, each company made different assumptions regarding the useful life and salvage value of its particular asset.

Required
a. Divide the class into groups of four or five students. Organize the groups into two sections. Assign one section of groups the copy machine data for Company A and Company B. Assign the other group the copy machine data for Company B and Company C.

Group Tasks
(1) Determine the amount of depreciation expense that each company will recognize on its Year 1 and Year 2 income statement.
(2) Determine the book value of the copy machine for each company as of December 31, Year 1 and Year 2.
(3) Have students in section one and two identify the company with the lowest depreciation expense and then explain why that company’s depreciation is lower. Have students in section three and four identify the company with the copy machine that has the highest book value, and then explain why that company’s book value is higher.

Transcribed Image Text:

Company A Company I Company C Cost of copy machine Salvage value Useful life $45,000 5,000 5 years $45,000 5,000 4 years $45,000 10,000 4 years