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EXERCISE 9.3 Depreciation for Partial Years On August 3, Cinco Construction purchased special-purpose equipment at a cost of S1,000,000. The useful life of the equipment
EXERCISE 9.3 Depreciation for Partial Years On August 3, Cinco Construction purchased special-purpose equipment at a cost of S1,000,000. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $50,000. a. Compute the depreciation cxpense to be recognized each calendar year for financial reporting parposes under the straight-line depreciation method (half-ycar convention). b. Compute the depreciation expense to be recognized each calendar year for financial ruporting purposes under the 200 pereent declining-balance method (half-ycar comvention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (strught-line or double-declining -balance) results in the highest net income for financial reporting purposes during the first two years of the equipment 's use? Explain
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