Reference no: EM13928738
Your client, Burley Designs, recently acquired a new machine to build bicycle wheels for the tandems, recumbents and trailers they build.
Total machine cost after installation, calibrations and other related capitalized costs was $18,250. The machine has an expected life of 7 years with a residual value of $2,000. The machine is capable of producing 20,000 wheels per year. Burley estimates that they will only ask the machine to produce as follows:
Year Anticipated Product Schedule Wheels
1 13,500
2 14,250
3 15,000
4 16,200
5 17,000
6 18,000
7 19,100
Required:
1. Prepare and present depreciation schedules for the machine. Use straight line, units of production and the double declining balance methods of depreciation.
2. For each method make a brief explanation of how the schedules were determined.
3. Discuss an advantage and disadvantage of each method.
4. Recommend a particular depreciation method for Burley to use and support your recommendation with reasoning.
5. Remember that your audience is professional, but not accountants.
6. Upload your memo and depreciation schedules to moodle in Week 6 at the link provided.
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