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.

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