E9-6 Computing Depreciation Under Alternative Methods

Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. The estimated useful life was five years, and the residual value was $2,000. Assume that the estimated productive life of the machine is 10,000 units. Expected annual production was: year 1, 2,000 units; year 2, 3,000 units; year 3, 2,000 units; year 4, 2000 units; year 5, 1,000 units.

Required:

Complete a depreciation schedule for each of the alternative methods. Round answers to the nearest dollar.

a. Straight-line

b. Units-of-depreciation

c. Double-declining- balance.

2. Which method will result in the highest net income in year 2? Does this higher net income mean the machine was used more efficiently under this depreciation method?

Year At acquisition Computation Income Statement Depreciation Expense Balance Sheet Accumulated Cost Depreciation Book Value