CHOICE AMONG DEPRECIATION METHODS. Walnut Ridge Printing, Inc., purchased a new computerized typesetting system at a cost of $370,000. The system has a residual value of $55,000 and an expected life of 5 years.

REQUIRED:

1. For the first 3 years of the computer’s life, compute depreciation expense, accumulated depreciation, and book value, using the straight-line, sum-of-the-years’-

digits, and double declining balance depreciation methods.

2. Which method would produce the largest income in the first, second, and third year, respectively, of the asset’s life?

3. Why might the controller of Walnut Ridge Printing be interested in the effect of choosing a depreciation method? Evaluate the legitimacy of these interests.