Question 3. (5 Marks) The NASA GDK Company has purchased production equipment with a cost of AED 1,200,000. The equipment is estimated to have a salvage value of AED 50,000 and 5 years of useful life. Additional information: The company estimates that the machinery will produce 800,000 units of product. The production is projected to be as follows: Year 1 = 260,000 units, Year 2 = 140,000 units Year 3 = 300,000 Year 4 = 40,000 and Year 5 = 60,000. Required: 1. (4 Marks) Determine the depreciation of the equipment for 3 years using the following depreciation methods: a) Straight line method b) Production method c) Double declining balance method 2. (1 Mark) If sales revenue is AED 500,000 in year 1, what is the net income if the tax rate is 10% under each method? Formulas: 1. Straight line method (cost salvage value) / years of life 2. Production method Step 1 Depreciation per production unit = Step 2 Depreciation per unit x units produced each year. 3. Double declining method Year 1 (Cost / years of life) x 200% Year 2 (Declining balance / years of life) x 200% Year n (Declining balance / years of life) x 200% Answer 1. 1. Straight line method 2. Production method 3. Double declining balance method Answer 2 1. Straight line method 2. Production method 3. Double declining balance method