Clarence Industries purchased a machine on 1 July 2016 for a total cost of $40,000. The owner is trying to decide whether to use the straight line, units of production or reducing balance depreciation method for this machine. The machine is expected to last for 4 years and have a residual value of $4,000 at the end of its useful life. Estimated total production is 150,000 units: year 1 is 50,000 units, year 2 is 30,000 units, year 3 is 50,000 units and year 4 is 20,000 units.

For the Reducing Balance method use 44% as the rate.

(a) What would be the written down value of the machine at 30th June 2018 for each depreciation method?

(b) Which depreciation method would give the lowest profit in the first year of the machines use? Explain your answer.