Navarro Corporation purchased machinery on January 1, 2010, at a cost of $330,000. The estimated useful life of the machinery is 5 years, with an estimated salvage value at the end of that period of $30,000. The company is considering different depreciation methods that could be used for financial reporting purposes.
Instructions
(a) Prepare separate depreciation schedules for the machinery using the straight line method, and the declining balance method using double the straight line rate.
(b) Which method would result in the higher reported 2010 income? In the higher total reported income over the 5 year period?
(c) Which method would result in the lower reported 2010 income? In the lower total reported income over the 5 year period?