Alley Limited recently purchased certain manufacturing equipment for $810 000. The equipment is expected to have a useful life of four years and a salvage value of $10 000. The manager of Alley Limited wishes to know the effect that various depreciation methods will have on the reported profit of the company and asks you to prepare a schedule comparing the straight-line and the reducing balance methods of depreciation (use 0.6667 for reducing balance).

1. Calculate the annual depreciation expense and end-of-year carrying amount of the equipment for each year of its estimated useful life. Show your workings.

2. What are the main factors that are likely to influence the useful life of a depreciable asset? What factors are likely to influence the manager in selecting a depreciation method?