Question 2 Crane Company purchased Machine #201 on May 1, 2020. The following information relating to Machine #201 was gathered at the end of May. Price $86,700 Credit terms 2/10, 1/30 Freight-in $ 816 Preparation and Installation costs $ 3,876 Labor costs during regular production operations $10,710 It is expected that the machine could be used for 10 years, after which the salvage value would be rero. Crane intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1.530. The invoice for Machine #201 was paid May 5, 2020. Crane uses the calendar year as the basis for the preparation of financial statements. Compute the depreciation expense for the years indicated using the following methods. Depreciation Expense (1) Straight-line method for 2020 (2) Sum-of-the-years-digits method for 2021 (3) Double-declining balance method for 2020 Suppose Mary Smith, the president of Crane, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company's depreciation expense to the early years and more to later years of the assets' lives. What method would you recommend? Activity Method Decreasing Change Method Special Depreciation Method Straight line Method Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc. Version 4