ACT300 Principles of Accounting Module 6 Critical Thinking Option 1

On June 1, a machine costing $660,000 with a 5-year life and an estimated $50,000 salvage value was purchased. It was also estimated that the machine would produce 200,000 units during its life. Actual production would be 40,000 units per year for all five years.

1. Using the depreciation template provided, determine the amount of depreciation expense for the third year under each of the following assumptions:
   1. The company uses the straight-line method of depreciation.
   2. The company uses the units-of-production method of depreciation.
   3. The company uses the double-declining-balance method of depreciation.
2.  Assuming straight line depreciation, prepare journal entry for the third year.
3. Assume the company sold the machine at the end of the fourth year for $100,000. Prepare a journal entry for asset disposal in the fourth year.
4. Assume you are the chief accountant of ABC Inc., a sheetrock manufacturer. Determine how you will choose, based on best industry practices, the depreciation method for ABC Inc. to use.

Your response to Part 4 should be at least one page and must include title and reference pages.