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P1 (35 points): You are responsible for selecting the depreciation method to use for new office furniture that you purchased for your non-profit. The
P1 (35 points): You are responsible for selecting the depreciation method to use for new office furniture that you purchased for your non-profit. The furniture costs $50,000 and has zero salvage value at the end of a 10-year depreciable life. Compute the depreciation schedule for the office furniture using; (a) Straight Line Depreciation (b) Double Declining Balance Depreciation (c) Sum-of-Years'-Digits Depreciation (d) The Modified Accelerated Cost Recovery System P2 (65 points): Your firm is considering buying a new piece of production equipment. A 10% interest rate is used for all calculations at the company. Two models of the equipment are available. Machine Model I $80,000 Machine Model II $100,000 $25,000 $18,000 20 years $15,000 (first 10 years) $20,000 (thereafter) 25 years Initial Cost End-of-Useful Life Salvage Value, S $20,000 Annual Operating Cost Useful Life (a) Based on EUAC, which machine should be purchased? (b) What is the capitalized cost of Machine I? (c) Machine I is purchased and a fund it set up to replace Machine I at the end of 20 years. Compute the required uniform annual deposit. (d) Machine I will produce an annual savings to the firm of $28,000. What is the rate of return if Machine I installed? (e) What will be the book value of Machine I after 2 years, based on Sum-of-Years'- Digits depreciation?
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