Rocky Point Foundry purchased factory equipment on March 15, 2012. The equipment will be depreciated for financial purposes over its estimated useful life, counting the year of acquisition as a half-year. The company accountant revealed the following information regarding this machine:
Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,000
Residual value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,000
Estimated useful life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 years
1. What amount should Rocky Point Foundry record for depreciation expense for 2013 using the
(a) Double-declining-balance method and
(b) Sum-of-the-years'-digits method?
2. Assuming the equipment is classified as 8-year property under the modified accelerated cost recovery system (MACRS), what amount should Rocky Point Foundry deduct for depreciation on its tax return in 2013?