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On January 2,2021 , Scott Company paid $264,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee
On January 2,2021 , Scott Company paid $264,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $1,000, sales tax of $7,000, and $28,000 for a special platform on which to place the computer. Scott's management estimates that the computer will remain in service for five years and have a residual value of $30,000. The computer will process 35,000 documents the first year, with annual processing decreasing by 2,500 documents during each of the next four years (that is, 32,500 documents in 2022 ; 30,000 documents in 2023; and so on). For help with deciding which depreciation method to use, the company president has requested a depreciation schedule for each of the three depreciation methods. If rounding is necessary, use two decimal places for the depreciation amount per document. Read the Requirement 3. Net cash provided by operations before income tax is $151,000 for the computer's first year. The company's income tax rate is 40%. For the two depreciation methods identified in requirement 2, compare the net income and net cash provided by operations (cash flow). Show which method gives the net income advantage and which method gives the cash flow advantage. Begin by comparing the net income. Show which method gives the net-income advantage
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