Mouskori Ltd purchased a machine on September 1, 2021 at a cash price of $187,800. On September 3^rd, it paid $1,200 for delivery of the machine. A one-year, $1,950 insurance policy on the machine was purchased on September 6^th. On September 20^th, Mouskori Ltd paid $7,000 for installation and testing of the machine. The machine was ready for use on September 30^th.

Mouskori estimates the machines useful life will be four years or 40,000 units, with no residual value. Assume the equipment produces the following number of units each year: 2,500 units in 2021; 10,300 units in 2022; 9,900 units in 2023; 8,800 units in 2024; and 8,500 in 2025. Mouskori has a December 31 year end.

Instructions:

a) Determine the cost of the machine. (2 marks)

b) Calculate the annual depreciation and the total depreciation over the assets life using (1) straight-line depreciation. (2) double-diminishing-balance depreciation. (3) units of production depreciation. Round the depreciation rate per unit to the nearest cent. (21 marks)

c) Which method causes net income to be lower in the early years of the assets life? (2 marks)