Rishika Corp. started its operations in year 2010 and was listed on the stock exchange in the year 2020. At the beginning of year 2022, Rishika had invested in a machinery which has a useful life of 5 years. The machinery's salvage value is expected to be RM10,000. Rishika can use straight line, double declining balance or sum-of-the- years-digit techniques to calculate the depreciation expense for the machinery. If Rishika uses the double declining balance method, the depreciation expense in year 2022 would be RM16,000. Rishika expects its earnings before depreciation, interest and taxes would be RM100,000 every year for year 2022 and year 2023. Interest expense is RM10,0000. The corporate tax rate is 25%. 

i. Compute Rishika's net income for year 2022 using straight line depreciation method.

 ii. Compute Rishika's net income for year 2022 and year 2023 using sum-of-the- years-digit depreciation method.

Answer rating: 100% (QA)

i To compute Rishikas net income for year 2022 using straightline depreciation method we need to calculate the depreciation expense first The machinerys cost or basis is not given in the problem so we ... View the full answer