Background

Dott Appliances needs to purchase new capital. They are contemplating a piece of equipment that has

an average cost of $$100,000.$ According to the IRS, this specific piece of equipment depreciates over $7$

years. The salvage value is listed at $$2,000.$ The company is treated as a "pass$-$through" entity

responsible for paying self$-$employment tax $($SET$)$ each year at $15\mathrm{.}3\%$ of their net profit.

Dott Appliances has forecasted the following gross revenue for the next seven $(7)$ years. This

information is as follows:

Assignment

In Excel, assemble a table that calculates the following types of depreciation:

Straight$-$Line

Sum$-$of$-$Years' Digits

Double$-$Declining$-$Balance

Next, create a chart tracking the trajectory of each form of depreciation across all seven years.

Which method provides Dott Appliances with the least amount of aggregate depreciation?

Given the revenues listed above, which year would this company not pay SET? Which accounting

method is the best way to reduce SET over the next seven years?