In July 2014, Savory Inc. (Savory) purchased new equipment for $450,000. Savory’s management estimates that the equipment’s useful life will be five years and that its residual value will be $45,000. Savory’s year-end is June 30.

Required:

a. Prepare a depreciation schedule for each year of the new piece of equipment’s life using i. straight-line depreciation il. declining balance depreciation (35 percent)

iil. unit-of-production method Your depreciation schedule should show the depreciation expense for each year and the carrying amount of the equipment and accumulated depreciation at the end of each year. For the unit-of-production method, assume that 15 percent of the productioni s produced in fiscal 2014 and 2015, 20 percent in 2016, and 25 percent in 2017 and 2018.

b. Which method do you think Savory’s managers would prefer if they have a bonus based on the company’s net income? Explain.