CCA CCA UCC - STRAIGHT-LINE METHOD Depreciation Carrying YEAR expense Amount 5 2017 6,570 89,030 2018 17,520 71,510 2019 17,520 53,990 2020 17,520 36,470 0 2021 17,520 18,950 1 2022 10,950 8,000 2 3 Total 87,600 277,950 DECLINING BALANCE Depreciation Carrying expense Amount 14,340 81,260 32,504 48,756 19.502 29,254 11,701 17,552 7,021 10,531 2.531 8,000 ACTIVITY-BASED ON OUTPUT Depreciation Carrying expense Amount 8,017 87,583 19,677 67,906 19,240 48.666 22,592 26,074 9,766 16,308 8,308 8,000 ACTIVITY - BASED ON INPUT Depreciation Carrying expense Amount 8,588 87,012 17,176 69.835 17,176 52,659 17,176 35,482 15,459 20,024 12,024 8,000 9,560 17,208 13,766 11,013 8,810 7,048 86,040 68,832 55,066 44,052 35,242 28,194 87,600 195,353 87,600 254,538 87.600 273,012 67.406 317.426 On June 15, 2017, a second-hand machine was purchased for $87,000. Before being put into service, the equipment was overhauled at a cost of $7,400, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the controls. The machine has an estimated residual value of $8,000 at the end of its five-year useful life. The machine is expected to operate for 100,000 hours before it will be replaced and is expected to produce 1.20 million units in this time. Operating data for the next six fiscal years are provided below. The company has an October 31 fiscal year end. Year 2017 2018 2019 2020 2021 2022 Hours of Operation 10,000 20,000 20,000 20,000 18,000 12,000 Units Produced 110,000 270.000 264,000 310,000 134,000 112,000 CCA Class 8, rate 20% Useage of machine: Year 2017 2018 2019 2020 2021 2022 Total Hours of operation 10,000 hours 20,000 hours 20,000 hours 20,000 hours 18,000 hours 14,000 hours 102,000 Units Produced 110,000 units 270,000 units 264,000 units 310,000 units 134,000 units 114,000 units 1,202,000 Part (c) revised useful life Part (c) revised residual value 7 years $4,000 Part (g) selling price of machine $24,250 e) Which method would minimize net income for the first three years? (Select your answer from the drop-down menu) Over the life of the asset? (Select your answer from the drop-down menu) f) Which method of depreciation would you recommend the company use? (Select your answer from the drop-down menu) Explain briefly why you selected that method. g) On the first day of fiscal 2021, the company decides to sell the machine for the amount shown in the "Data" page. Calculate the gain or loss under each method. AMOUNT METHOD OF GAIN STRAIGHT-LINE formula DECLINING BALANCE formula ACTIVITY - BASED ON OUTPUT formula ACTIVITY - BASED ON INPUT formula