Comparison of methods of depreciation Carrington 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 Carrington 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?