On January 3 2013 B W Soffer Inc paid 224 000 for #6673

On January 3, 2013, B.W. Soffer Inc. paid $224,000 for a computer system. In addition to the
basic purchase price, the company paid a setup fee of $6,200, $6,700 sales tax, and $3,100 for
special installation. Management estimates that the computer will remain in service for five
years and have a residual value of $20,000. The computer will process 50,000 documents the
first year, decreasing annually by 5,000 during each of the next four years (that is, 45,000
documents in 2014, 40,000 documents in 2015, and so on). In trying to decide which
depreciation method to use, the company president has requested a depreciation schedule for
each of three depreciation methods (straight-line, units-of-production, and double-diminishing-
balance).Requirements1. Prepare a depreciation schedule for each of the three depreciation
methods listed, showing asset cost, depreciation expense, accumulated depreciation, and asset
carrying amount.2. B.W. Soffer Inc. reports to shareholders and creditors in the financial
statements using the depreciation method that maximizes reported income in the early years of
asset use. Consider the first year B.W. Soffer Inc. uses the computer system. Identify the
depreciation method that meets the company's objectives. Discuss the advantages of each
depreciation method.View Solution:
On January 3 2013 B W Soffer Inc paid 224 000 for

ANSWER
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