P$9\mathrm{.}3$B $($LO $1,2)($Determine cost; calculate depreciation under different methods.$)$ Mouskori

Limited purchased a machine on September $1,2024,$ at a cash price of $$187,800.$ On September

$3,$ it paid $$1,200$ for delivery of the machine. A one$-$year, $$1,950$ insurance policy on the

machine was purchased on September $6.$ On September $20,$ Mouskori paid $$7,000$ for

installation and testing of the machine. The machine was ready for use on September $30.$

Mouskori estimates the machine's useful life will be four years, or $40,000$ units, with no

residual value. Assume the equipment produces the following number of units each year:

$2,500$ units in $2024$; $10,300$ units in $2025$; $9,900$ units in $2026$;$8,800$ units in $2027$; and $8,500$

units in $2028.$ Mouskori has a December $31$ year end.

Instructions

a$.$ Determine the cost of the machine.

b$.$ Calculate the annual depreciation and the total depreciation over the asset's life using

$(1)$ straight$-$line depreciation, $(2)$ double$-$diminishing$-$balance depreciation, and $(3)$

units$-$of$-$production depreciation. Round the depreciation rate per unit to the nearest

cent. Which method causes net income to be lower in the early years of the asset's life?

c$.$ Assume that the company, after recording depreciation using the straight$-$line method

for the first nine months of $2026,$ determined on October $1,2026,$ that it could operate

the machine for three more years and at the end of that time, its residual value would

be $$2,000.$ Calculate the depreciation expense for the machine for the year ended

December $31,2026.$

d$.$ Assume that, when Mouskori Corporation purchased the machine, there was no

residual value and the company had a legal obligation to ensure the machine would be

recycled at the end of its useful life. The cost of this recycling will be significant. Would

this have an impact on the answer to part $($a$)$ above? Explain.