Shumway Corporation purchased machinery on January 1, 2007, at a cost of Compute depreciation under

$290,000. The estimated useful life of the machinery is 5 years, with an estimated sal- different methods.

vage value at the end of that period of $30,000. The company is considering different (SO 3, 9)

depreciation methods that could be used for financial reporting purposes.

Instructions

(a) Prepare separate depreciation schedules for the machinery using the straight-

(a) Double-decliningline method, and the declining-balance method using double the straight-line rate. balance exp. 2008 $69,600

(b) Which method would result in the higher reported 2007 income? In the higher total reported income over the 5-year period?

(c) Which method would result in the lower reported 2007 income? In the lower total reported income over the 5-year period?