Problem 9.2A Comparison of Straight-Line and Accelerated Methods (LO9-3, LO9-5)

Swanson & Hiller, Inc., purchased a new machine on September 1, 2012 at a cost of $150,000. The machines estimated useful life at the time of the purchase was five years, and its residual value was $10,000.

Instructions

a-1.	Prepare a complete depreciation schedule, beginning with calendar year 2012, using the straight-line method. (Assume that the half-year convention is used).

Year	(Depreciation Expense)	(Accumulated Depreciation)	(Book Value)
2012
2013
2014
2015
2016
2017
sheet is drawn here

a-2.	Prepare a complete depreciation schedule, beginning with calendar year 2012, using the 200 percent declining-balance method. (Assume that the half-year convention is used). (Round your answers to the nearest dollar amount.)

Year	(Depreciation Expense)	(Accumulated Depreciation)	(Book Value)
2012
2013
2014
2015
2016
2017
sheet is drawn here

a-3.	Prepare a complete depreciation schedule, beginning with calendar year 2012, using the 150 percent declining-balance, switching to straight-line when that maximizes the expense. (Assume that the half-year convention is used). (Round your answers to the nearest dollar amount.)

Year	(Depreciation Expense) (	Accumulated Depreciation)	(Book Value)
2012
2013
2014
2015
2016
2017
sheet is drawn here

b.	Which of the three methods computed in part a is most common for financial reporting purposes?

	150 percent declining-balance method
	Straight-line method
	200 percent declining-balance method

c.	Assume that Swanson & Hiller sells the machine on December 31, 2015, for $30,500 cash. Compute the resulting gain or loss from this sale under each of the depreciation methods used in part a. (Use rounded book values for calculations. Round your final answers to the nearest whole dollar.)

Straight-Line
200 percent declining-balance.
150 percent declining-balance.