On March 29, 1998, Global Manufacturing purchased new equipment with a cost of  $70,000 as an estimated useful life of 5 years and an estimated residual value of $10,000.  For income tax purposes, this equipment is classified as 5-year property. 

INSTRUCTIONS:

 1. Compute the annual depreciation expense for each year until this equipment becomes fully depreciated under each of the depreciation methods listed below.  (Because you will record depreciation for only a fraction of a year in 1998,  depreciation will extend through 2003) show supporting computations.

 I. Straight line, with depreciation for fractional years rounded to the nearest whole month.

 II. MACRS accelerated rates for 5 years property 

2. Global has two conflicting objectives. Management wants to report the highest possible earnings to stockholders in the near future yet also wants to minimize the taxable income. Indicate the depreciation method that the company will probably use in its financial statement and its federal income tax return. Explain the reasons for your answers.