17 Jun DISCUSS AN ADVANTAGE AND DISADVANTAGE OF EACH METHOD.
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.
5. Remember that your audience is professional, but not accountants.
6. Upload your memo and depreciation schedules to moodle in Week 6 at the link provided.
Tips:
1. All schedules and your memo should be prepared on the computer (no handwritten work).
You may imbed your excel schedules into a Word file, if you prefer.
2. Your memo should follow proper memo formatting (see the example in moodle).
3. Your memo should be written in full sentences, as though you expect it to be read by a
reasonably astute business user.
4. Proofread your work before turning it in!
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