Chapter 11, Problem 11.4P

Depreciation Methods and Depreciation Schedules. On January 1 of the current year Minguss Manufacturing Company purchased a metal cutting and polishing machine at a cost of $4,000,000. The installation and delivery costs amounted to $250,000. The firm expects the machine to be productive for a total of 5 years and a residual value of $500,000 at the end of the asset’s useful life.

Required

Prepare the depreciation schedules for the machine assuming that the following methods were used (each case is independent)

1. 1. Straight-line method
2. 2. Double-declining balance method (DDB). (Reduce the depreciation expense in the last year to the necessary amount to arrive at an ending book value equal to the scrap value.)