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LO9-3, LO9-5 PROBLEM 9.2A Comparison of Straight-Line and Accelerated Methods Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year
LO9-3, LO9-5 PROBLEM 9.2A Comparison of Straight-Line and Accelerated Methods Swanson \& Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $108,000. The machine's estimated useful life at the time of the purchase was five years, and its residual value was $8,000. The company reports on a calendar year basis. Instructions a. Prepare a complete depreciation schedule, beginning with the current year, under each of the following methods listed (assume that the half-year convention is used). 1. Straight-line. 2. 200 percent declining-balance. 3. 150 percent declining-balance, switching to straight-line when that maximizes the expense. b. Which of the three methods computed in part a is most common for financial reporting purposes? Explain. c. Assume that Swanson \& Hiller sells the machine on December 31 of the fourth year for $29,000 cash. Compute the resulting gain or loss from this sale under each of the depreciation methods used in part a. Does the gain or loss reported in the company's income statement have any direct cash effects? Explain
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