Problem 9-3A

Payne Company purchased equipment on account on September 3, 2019, at an invoice price of $210,000. On September 4, 2019, it paid $4,400 for delivery of the equipment. A one-year, $1,975 insurance policy on the equipment was purchased on September 6, 2019. On September 20, 2019, Payne paid $5,600 for installation and testing of the equipment. The equipment was ready for use on October 1, 2019. Payne estimates that the equipment's useful life will be four years, with a residual value of $15,000. It also estimates that, in terms of activity, the equipment's useful life will be 82,000 units. Payne has a September 30 fiscal year end. Assume that actual usage is as follows:

# of Units		Year Ended September 30
16,750		2020
27,600		2021
22,200		2022
16,350		2023

Determine the cost of the equipment.

Cost of equipment

$

Prepare depreciation schedules for the life of the asset under the following depreciation methods:

1.		straight-line
2.		double diminishing-balance
3.		units-of-production

(Round depreciable amount per unit to 2 decimal places, e.g. 5.27 and the final answers to 0 decimal places, e.g. 5,276.)

Which method would result in the highest profit for the year ended September 30, 2021? Over the life of the asset? Double Diminishing-Balance Units-of-ActivityAll three methodsStraight-line method would result in the highest profit for the year ended September 30, 2021. Over the life of the asset, all three methodsunits-of-activitystraight-line double diminishing-balance result in the same total depreciation expense.