Arnotts Biscuits purchased a factory machine for $450,000 on 1 January 2016. Freight cost for the factory machine was $4,500 and installation cost were $1,000. All prices are GST exclusive. The policy of the company is to depreciate machinery at a rate of 25% annually using the diminishing balance method.

Required:

1. Calculate the depreciation deductions that Arnotts Biscuits will be able to claim for the 2016 and 2017 income years, using the appropriate depreciation method based on the information provided.
2. Prepare the journal entries to record the depreciation expense for the 2016 and 2017 years.