Nicole s Getaway Spa NGS purchased a hydrotherapy tub

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Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness
programs at NGS. The machine was purchased at the beginning of the year at a cost of $
7,000. The estimated useful life was five years and the residual value was $ 500. Assume that
the estimated productive life of the machine is 13,000 hours. Expected annual production was
year 1, 3,100 hours; year 2, 2,500 hours; year 3, 3,400 hours; year 4, 2,200 hours; and year 5,
1,800 hours. Required:1. Complete a depreciation schedule for each of the alternative methods.
a. Straight- line. b. Units- of- production. c. Double- declining- balance.2. Assume NGS sold the
hydrotherapy tub system for $ 2,100 at the end of year 3. Pre-pare the journal entry to account
for the disposal of this asset under the three different methods.3. The following amounts were
forecast for year 3: Sales Revenues $ 42,000; Cost of Goods Sold $ 33,000; Other Operating
Expenses $ 4,000; and Interest Expense $ 800. Create an income statement for year 3 for each
of the different depreciation methods, ending at Income before Income Tax Expense. (Don’t
forget to include a loss or gain on disposal for each method.)View Solution:
Nicole s Getaway Spa NGS purchased a hydrotherapy tub system to

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