Wiggens Co. purchased a new machine to increase their production capacity. Following were the expenditures related to purchase of the machine. Purchase price $30,000 Sales Tax $3,200 Freight cost $4,800 Installation $7,000 The machine has a useful life of 7 years and salvage value of $3,000. The installation team also agreed on a service charge of $500/per visit, if there is any technical fault during the life of machine. Calculate the machines annual depreciation expense using the straight line method.

Calculate depreciation expense for the first three years of machine using the double declining balance method. Suppose instead after 5 years of straight line depreciation, wiggens sells the machine for $25,500. Calculate the gain or loss on the sale.