Sandhill Limited purchased a machine on account on April 2, 2018, at an invoice price of...

Sandhill Limited purchased a machine on account on April 2, 2018, at an invoice price of $332,220. On April 4, it paid $2,170 for delivery of the machine. A one-year, $3,960 insurance policy on the machine was purchased on April 5. On April 18, Sandhill paid $7,840 for installation and testing of the machine. The machine was ready for use on April 30.

Sandhill estimates the machine’s useful life will be five years or 6,153 units with a residual value of $77,180. Assume the machine produces the following numbers of units each year: 953 units in 2018; 1,483 units in 2019; 1,279 units in 2020; 1,390 units in 2021; and 1,048 units in 2022. Sandhill has a December 31 year end.
(1) Straight-line method
(2) Double-diminishing-balance method
(3) Units-of-production method
Which method causes net income to be lower in the early years of the asset’s life?

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ekkarill92 answered 1 year ago

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