Depreciation Calculations On January 1, Clauser Company purchased a $79,000 machine. The estimated life of the machine was four years, and the estimated salvage value was $4,000. The machine had an estimated useful life in productive output of 90,000 units. Actual output for the first two years was: year 1, 25,000 units; year 2, 18,000 units.

Required:

1. Compute the amount of depreciation expense for the first year, using each of the following methods:

a. Straight-line.

b. Units-of-production.

2. What was the book value of the machine at the end of the first year, assuming that straight-line depreciation was used?

3. If the machine is sold at the end of the third year for $20,000, how much should the company report as a gain or loss (assuming straight-line depreciation)?