Depreciation Choices and Outcome. Mulligan Co. purchased a new machine on January 1. The following information pertains to the purchase:

Life of asset	5 years
Salvage value	$6,000
Purchase price	36,000
Sales tax	2,000
Freight cost	1,600
Electrical set-up	1,400
Custom programming	1,000
Estimated annual labor savings	7,000
Additional revenue generated	16,000

a. Determine the capitalized cost of the new machine $Answer

b. Compute annual depreciation, accumulated depreciation and the machine's book value for the first three year assuming: i. Straight-line depreciation ii. Double-declining-balance method

Straight-Line Depreciation				Double-Declining Balance
	Depreciation Expense	Accumulated Depreciation	Book Value at Year-end		Depreciation Expense	Accumulated Depreciation	Book Value at Year-End
Year 1	Answer	Answer	Answer		Answer	Answer	Answer
Year 2	Answer	Answer	Answer		Answer	Answer	Answer
Year 3	Answer	Answer	Answer		Answer	Answer	Answer

c. Assume the machine is sold for $16,000 at the end of the third year after depreciation has been calculated. Determine the gain or loss assuming: i. Straight-line depreciation ii. Double-declining balance method

Do not use negative signs with your answers below.

		Amount	Gain or Loss
Straight-line		Answer	Answergainloss
Double-declining		Answer	Answergainloss

d. Given your answer in part c, if Mulligan was able to perfectly predict the future that the machine would be sold for $16,000 at the end of the third year, which depreciation method should Mulligan choose? Ignore taxes.

A.Mulligan's overall cash flow results would be greater if the straight-line method is used.

B.Mulligan's overall cash flow results would be greater if the double-declining method is used.

C.Mulligan's overall cash flow results would be the same with either depreication methods.