The White Swan Talc Company purchased $120,000 of mining equipment for a small talc mine. The mining engineer's report indicates the mine contains 40,000 cubic meters of commercial quality talc. The company plans to mine all the talc in the next 5 years as follows:
Year Talc Production (m3)
1.................................15,000
2.................................11,000
3..................................4,000
4..................................6,000
5..................................4,000
At the end of 5 years, the mine will be exhausted and the mining equipment will be worthless. The company accountant must now decide whether to use sum-of-years' -digits depreciation or unit-of-production depreciation. The company considers 8% to be an appropriate time value of money. Compute the depreciation schedule for each of the two methods. Which method would you recommend that the company adopt? Show the computations to justify your decision.