A Depreciation, calculations, entries and effects At the beginning of 2021, Fortress Ltd acquired machinery that cost $100 000, had a useful life of 10 years and zero scrap value. During 2021 and 2022 the company depreciated this machinery using the straight-line method. Assume a tax rate of 40 per cent.

1 Calculate the depreciation expense Fortress has recognised for 2021 and 2022 and write a journal entry to record either year’s amount.

2 Calculate the depreciation expense Fortress would have recorded, had it been using the reducing balance method for 2021 and 2022 (assume a depreciation rate of 20 per cent).

3 Calculate the effects of changing from straight-line to reducing balance on the following:

a the balance sheet at the end of 2021 b the income statement for 2022 c the balance sheet at the end of 2022.