Best Buy Company Limited (Best Buy) bought a machine for $400,000 on 1 July 2019. The machine had an estimated residual value of $50,000, and had estimated useful life of 10 years, or had an estimated operation output of 50,000 hours. The financial year-end date of Best Buy is 31 December

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Best Buy Company Limited (Best Buy) bought a machine for $400,000 on 1 July 2019. The machine had an estimated residual value of $50,000, and had estimated useful life of 10 years, or had an estimated operation output of 50,000 hours. The financial year-end date of Best Buy is 31 December.

Required:

(a) Compute the depreciation on this machine in the years of 2019 and 2020 using the following methods.

  1. (i) Straight-line (with depreciation calculated to the nearest whole month)

  2. (ii) 200%-declining-balance (with half-year convention)

  3. (iii) Units-of-output method (hours of operation:2,500 in 2019; 5,000 in 2020)

2019

(i)$________ (ii)$________ (iii)$________

2020

(i)$________ (ii)$________ (iii)$________


(b) Which of the method(s) in part (a) would result in the highest net profit in the year of 2019?Briefly explain.

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