DEPRECIATION METHODS Berkshire Corporation purchased a copying machine for $9,800 on January 1, 2009.

The machine’s residual value was $1,175 and its expected life was five years or 2,000,000 copies. Actual usage was 480,000 copies the first year and 440,000 the second year.

Required:

. Compute depreciation expense for 2009 and 2010 using the:

a. straight-line method

b. double-declining-balance method

c. units-of-production method

. For each depreciation method, what is the book value of the machine at the end 2009? At the end of the 2010?

. Assume that Berkshire Corporation decided to use the double-declining-balance method of depreciation. What is the effect on assets and income relative to if Berkshire had used the straight-line method of depreciation?

Exercise