Waterloo Machining, Inc. paid $1,800,000 for factory equipment on January 1, 2012. It paid $100,000 for delivery and $220,000 for installation and modifications.  Waterloo received $60,000 upon sale of the old equipment. The new equipment has an estimated useful life of 5 years, an estimated residual value of $100,000 andis expected to produce 500,000 units.

Required: Answer each of the following questions in the space provided.

a) Determine the acquisition cost of the new equipment.

b) Assume that the factory equipment was recorded at $2,100,000.  Calculate the depreciation expense for each year 1-3 of the equipment's useful life under the following methods and assumptions.

Year                Units Produced                       Straight Line                          

2012                            125,000

2013                            130,000

2014                            100,000

c) On December 31, 2015 Waterlooestimated that the equipment had a useful life of four years and 200,000 units of productive capacity remaining.  Compute 2015 depreciation expense under both methods assuming that 85,000 units were produced in 2015.