On January 2, 2021, Jatson Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $40,000 with an estimated residual value of $5,000.  

a. Prepare a complete depreciation table under the three depreciation methods listed as follows. Use a format similar to the illustrations in Exhibits 9–4, 9–5, and 9–6. In each case, assume that a full year of depreciation was taken in 2021. 1. Straight-line. 2. 200 percent declining-balance. 3. 150 percent declining-balance with a switch to straight-line when it will maximize depreciation expense. 

b. Comment on significant differences or similarities that you observe among the patterns of depreciation expense recognized under each of these methods.

Transcribed Image Text:

Year First Second Third Fourth Fifth Sixth Total Depreciation Schedule Straight-Line Method with Half-Year Convention Computation $15,000 x ½ x ½ 15,000 x ¹½ 15,000 x 1 15,000 x ¹1 15,000 x ¹ 15,000 x 15 x ½ Depreciation Expense $1,500 3,000 3,000 3,000 3,000 1,500 $15,000 Accumulated Depreciation $ 1,500 4,500 7,500 10,500 13,500 15,000 Book Value $17,000 15,500 12,500 9,500 6,500 3,500 2,000 EXHIBIT 9-4 Straight-Line Depreciation Schedule