Bruce and Haiwen started a company together in Montreal. Recently, they got into some arguments with the accounting of their car in the company. They purchased a Ghibli on June 25, 2019 at a price of $80,000. The car is expected to have a physical life of 10 years, after which the residual value would be zero. However, they only intend to use the car for 4 years, after which they would be selling the car at an estimated price of $13,000 and relocating to the lovely Toronto in Canada.

It is now December 31, 2019. Assume they prepare financial statements on a calendar-year basis and records depreciation to the nearest month for acquisitions made during the year.

Compute the depreciation expense using the double-declining method for 2019-2023. Do not put any comma or $ sign, and round your answers to the closest dollar. If none, write 0.

They continue to argue whether they should use the straight-line method or the double-declining method to account for the depreciation of the new car. For each of the following independent situations below, indicate which one of the two depreciation methods they would more likely choose if they want to exercise depreciation earnings management. Write 1 if straight-line method, 2 if double-declining method, 3 if it does not matter.

1. It is expected that the company will be highly successful in the future down the road but not as much at the beginning.

2. With the COVID, they do not mind to have a big bath now so the performance would become better in the future.

3. They want to feel good to see the net income grow steadily over the next 3 years, and they do not want to disappoint themselves.

4. With the current tax relief, they have no need to minimize their tax payment.

5. They suffer huge loss on currency translation with their foreign investment as of the COVID situation and they want to mitigate this negative signal.

ANSWERS for all 1-5, show how to solve them individually.