On January 1, 2019, Sheridan Company, a small machine-tool manufacturer, acquired for $1,540,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $79,900. Sheridan estimates that the new equipment can produce 13,000 machine tools in its first year. It estimates that production will decline by 1,790 units per year over the remaining useful life of the equipment. The following depreciation methods may be used: (1) straight-line, (2) double-declining-balance, (3) sum-of-the-years'-digits, and (4) units-of-output. For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation. Recovery Year 3-year (200% DB) 33.33 44.45 14.81 7.41 MACRS Depreciation Rates by Class of Property 5-year 7-year 10-year (200% DB) (200% DB) (200% DB) 20.00 14.29 10.00 32.00 24.49 18.00 19.20 17.49 14.40 11.52* 12.49 11.52 11.52 8.93* 9.22 ....... 5.76 8.92 7.37 8.93 6.55* 4.46 6.55 6.56 6.55 3.28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 15-year (150% DB) 5.00 9.50 8.55 7.70 6.93 6.23 5.90* 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 PLE 20-year (150% DB) 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 *Switchover to straight-line depreciation. Compute accumulated depreciation under the following methods: (1) straight-line, (2) double-declining-balance, (3) sum-of- the-years'-digits, and (4) units-of-output for the 3-year period ending December 31, 2021. Ignore present value, income tax, and deferred income tax considerations. (Round cost per unit to 2 decimal places, e.g. 25.12. Round other intermediate calculations to 6 decimal places, eg. 1.524687 and final answers to O decimal places, eg. 5,125.) Accumulated Depreciation 2020 Methods 2019 2021 (1) $ $ $ (2) $ $ $ $ Straight-line Double- declining- balance Sum-of-the- years'-digits Units-of-output (3) $ $ (4) $ $ $ e Textbook and Media Which depreciation method would maximize net income for financial statement reporting for the 3-year period ending December 31, 2021? The depreciation method would maximize net income. Compute accumulated depreciation by using MACRS and optional straight-line method for the 3-year period ending December 31, 2021. Ignore present value considerations. Accumulated Depreciation 2020 2019 2021 Methods MACRS $ $ $ $ $ Optional straight-line method $ $ $ $ $ eTextbook and Media Which depreciation method would minimize net income for income tax reporting for the 3-year period ending December 31, 2021? The depreciation method would minimize net income. e Textbook and Media
