Problem 99A Ayayai Corporation purchased machinery on Januar

Problem 9-9A Ayayai Corporation purchased machinery on January 1, 2017, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $26,000. The company is considering different depreciation methods that could be used for financial reporting purposes. Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation End of Year Annual Depreciation Expense Accumulated Depreciation Book Value Years Depreciable Cost x Depreciation Rate 2017 2018 2019 2020 DOUBLE DECLINING BALANCE DEPRECIATION Computation End of Year Years Book Value Beginning of Year Depreciation Rate Annual Depreciation Expense Accumulated Depreciation Book Value 2017 2018 2019 2020 7,750

Solution

Straight line depreciation :

Double decline depreciation :

Straight line method would result in the higher reported income. No it is not highest reported income over 4 year period

Double decline method would result in the lower reported income. No it is not lower reported income over 4 year period

	Computation			End of year
Year	Depreciable cost	*	Depreciation rate	=	Annual depreciation expense	Accumlated depreciation	Book value
2017	244000	*	25%	=	61000	61000	209000
2018	244000	*	25%	=	61000	122000	148000
2019	244000	*	25%	=	61000	183000	87000
2020	244000	*	25%	=	61000	244000	26000
Total	244000