Chapter 11, Problem 11.17E

Depreciation Methods. Ace Manufacturing, Inc. purchased a new piece of manufacturing equipment at a total acquisition cost of $3,000,000 on January 4 of the current year. The firm estimates that the equipment has a useful life of 10 years or 13,250,000 units of output and a residual value of $350,000 at the end of its useful life. The following schedule indicates the actual number of units output with the machine per year:

Year	Units of Output	Year	Units of Output
1	1,600,000	6	1,300,000
2	1,600,000	7	1,200,000
3	1,500,000	8	1,200,000
4	1,500,000	9	1,100,000
5	1,300,000	10	1,100,000

Required

Prepare the depreciation schedules for the manufacturing equipment assuming that Ace used the following methods (each case is independent):

1. a. Straight-line method.
2. b. Units-of-output method.
3. c. Double-declining balance method. (Reduce the depreciation expense in the last year to the necessary amount to arrive at an ending book value equal to the scrap value.)
4. d. Ace sells the manufacturing equipment at the end of Year 5 for $1,465,000. What is the gain or loss on sale under each of the depreciation methods in parts (a)–(c)?