Question
Nicoles Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of
Nicoles Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $5,500. The estimated useful life was five years and the residual value was $500. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2,300 hours; year 2, 2,400 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours. Assume NGS sold the hydrotherapy tub system for $1,650 at the end of year 3. The following amounts were forecast for year 3: Sales Revenues $45,000; Cost of Goods Sold $35,000; Other Operating Expenses $4,500; and Interest Expense $900. Create an income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't forget to include a loss or gain on disposal for each method.). (Do not round intermediate calculations. Any losses should be indicated with a minus sign. Round your answers to the nearest dollar amount.)
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