Berkshire Corporation purchased a copying machine for $9,800 on January 1, 2009. The machine’s residual value was $1,175 and its expected life was five years or 2,000,000 copies. Actual usage was 480,000 copies the first year and 440,000 the second year.
1. Compute depreciation expense for 2009 and 2010 using the:
a. Straight-line method
b. Double-declining-balance method
c. Units-of-production method
2. For each depreciation method, what is the book value of the machine at the end 2009? At the end of the 2010?
3. Assume that Berkshire Corporation decided to use the double-declining-balance method of depreciation. What is the effect on assets and income relative to if Berkshire had used the straight-line method of depreciation?