Reference no: EM133052635
Question - Jordash Company purchased Machine #573 on May 1, 2015. The following information relating to Machine #573 was gathered at the end of May:
Price $40,400
Credit terms 2/10, n/30
Freight-in costs $ 568
Preparation and installation costs $ 2,090
Labor costs during regular production operations $ 5,775
It was expected that the machine could be used for 10 years, after which the salvage value would be zero. Jordash intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $750. The invoice for Machine #573 was paid May 5, 2018. Jordash uses the calendar year as the basis for the preparation of financial statements.
-Compute the depreciation expense for the years indicated using the following methods. (Round to the nearest dollar.)
-Straight-line method for 2018.
-Sum-of-the-years'-digits method for 2019.
-Double-declining balance method for 2018.
-Suppose Jodi Scott, the president of Jordash, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company's depreciation expense to the early years and more to later years of the assets' lives. What method would you recommend?