P$10-4$ Calculating depreciation by three methods and the advantage of

accelerated depreciation for tax purposes $[20-30$ min$]($LO $2$ E$)$

On $3$ January $2022,$ Dream Photography paid $$224000$ for photo equipment.

In addfion to the purchase price, Dream paid $$700$ treight charges, $$100$

rsurance for the equipment while in trarsit, $$12100$ customs duty and

$$3100$ for specialsed programming to set up the equipmont. Dream

estimates that the equipment will remain in sorvice for the years and have a

residual value of $$20000.$ The equipment should produce $50000$ photos the

frst year, with annual production decreasing by $5000$ photos during each of

the next four yoars $($Le$.45000$ photos in year $2,40000$ in yoar $3$ and $50$ on$-$

a total of $200000$ photos$).$ in trying to decide which deprectation method to

use, Dream has requestod a doprectation schedule for each of three

deprecialion methods $($straight ane, unts of production and reducing balance$).$

Requirements

For each depreciation method, propare a depreciation schedule

showing asset cost, deprociation expense, accumulatod dopreciation

and assot carrying amount. For the roducing$-$balance met

doprediation rate basod on:

RB rato $1-200002400005=1-0\mathrm{.}609=0\mathrm{.}392$

Dream propores financial statoments using the deprociath a mothx. $1$

that reports the highest proft in the earty years. For income tax

purposes, the firm uses the method that minimises income tax in the

earty years. Consider the first year of using the equipment. Identify the

dopredation methods that meet Dream's objoctives, assuming that the

income tax autherties porme the use of anry of the methods.