P$9\mathrm{.}4$A $($LO $2)($Calculate and compare depreciation under different methods.$)$

Makoons Limited purchased equipment on February $1,2024,$ at a cost of $$180,000.$ As the CFO of the company, you are considering the merits of using the diminishing$-$balance or units$-$of$-$production method of depreciation instead of the straight$-$line method, which is currently being used for other equipment. The new equipment has an estimated residual value of $$10,000$ and an estimated useful life of either five years or $100,000$ units. Demand for the products produced by the equipment is sporadic, so the equipment will be used more in some years than in others. Assume the equipment produces the following numbers of units each year: $17,000$ units in $2024$; $29,500$ units in $2025$; $21,000$ units in $2026$; $18,000$ units in $2027$; $14,000$ units in $2028$; and $500$ units in $2029.$ Makoons has a December $31$ year end.

Instructions

a$.$ Prepare separate depreciation schedules for the life of the equipment using $(1)$ the straight$-$line method, $(2)$ the double$-$diminishing$-$balance method, and $(3)$ the units$-$of$-$production method.

b$.$ Compare the total depreciation expense and accumulated depreciation under each of the three methods over the life of the equipment.

c$.$ What estimates were used in determining the depreciation amounts in part $($a$)?$ How accurate do you think these estimates are?

d$.$ How does each method of depreciation affect the company's cash flows?

e$.$ Which method do you recommend? Why?