The ABC Company purchased a new machine on January 1 2017 at a cost of $800,000 the company estimates that the machine has a salvage value of $50,000. The machine is expected to be used for 200,000 working hours during its 10-year life.

a) Compute the yearly depreciation expense for each of the ten years using straight line depreciation. Show the book value (asset value less accumulated depreciation) for the machine at the end of 2017 and 2018.

b) Compute the depreciation expense for the first two years using declining balance (double declining balance) for five years. Show the book value for the machine at the end of 2017 and 2018.

c) Units of activity for 2017 was 25,000 units and for 2018 was 20,000 units; calculate the depreciation expense for 2017 and 2018.

d) What would be the difference in net income before taxes be for the 1st year by using declining balance instead of straight line.