Carleton Corporation purchased machinery on October 1, 2016, at a total cost of $98,000. Estimated residual value is $8,000, estimated life of the machinery is 6 years or 50,000 hours. During 2016 and 2017, the machinery was used 1,400 and 8,760 hours, respectively.

Required:

a. Compute depreciation under straight-line, units-of-production, and double-declining-balance methods for 2016 and 2017. (15 marks)

b. Record the journal entry for depreciation expense for the year ended December 31, 2017 under the straight-line method. (2 marks)

c. Which method results in the lowest profit for the first two years? Why? (3 marks)