Hector, Inc., purchased a new machine on Jan. 1, 2015. The cost of this machine was $800,000. The company expects the machine to remain useful for 4 years (1000,000 units), and to have a residual value of $50,000. The units produced was 170,000 units in the first year, and 130,000 units in the second year. Required: 1. Prepare a schedule of depreciation expense per year for the machine under the three depreciation methods (straight line, unit of production and double declining balance method) for only the first 2 years. The Year end at Dec, 31. 2. Prepare the adjustment entry for the depreciation for the second year if the company uses the straight line method. 3. Show the effect of the adjustment made in requirement (2) on the balance sheet and income statement. 4. Which method can be used to maximize the net income in the first year? Solution