Pharoah Limited purchased a machine on account on April 2, 2018, at an invoice price of $356,620. On April 4, it paid $2,130 for delivery of the machine. A one-year, $3,970 insurance policy on the machine was purchased on April 5. On April 18, Pharoah paid $7,590 for installation and testing of the machine. The machine was ready for use on April 30.

Pharoah estimates the machine’s useful life will be five years or 6,212 units with a residual value of $73,690. Assume the machine produces the following numbers of units each year: 896 units in 2018; 1,400 units in 2019; 1,405 units in 2020; 1,396 units in 2021; and 1,115 units in 2022. Pharoah has a December 31 year end.

A/ Determine the cost of the machine.

Cost of the machine

$

B/

Calculate the annual depreciation and total depreciation over the asset’s life using: (Round the depreciation cost per unit to the nearest cent. Round answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line method

Year		Depreciable Cost		Depreciation Expense		Accumulated Depreciation		Carrying Amount
2018		$		$		$		$
2019
2020
2021
2022
2023

(2) Double-diminishing-balance method

Year		Opening Carrying Amount		Depreciation Expense		Accumulated Depreciation		Carrying Amount
2018		$		$		$		$
2019
2020
2021
2022
2023

(3) Units-of-production method

Year		Units-of-production		Depreciation Expense		Accumulated Depreciation		Carrying Amount
2018				$		$		$
2019
2020
2021
2022

Which method causes net income to be lower in the early years of the asset’s life?

Straight-Line Method Double-Diminishing-Balance MethodUnits-of-Production Method Straight-Line Method Double-Diminishing-Balance MethodUnits-of-Production Method