Martinez Corporation purchased machinery on January 1, 2022, at a cost of $268,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $31,800. The company is considering different depreciation methods that could be used for financial reporting purposes. (SEE PICTURE)

see below

Explanation:

1. Depreciation using the straight-line method.

Under the straight-line method, depreciation is a constant figure in every year of an asset's useful life.

The calculation of depreciation expense is by establishing the depreciable amount, which is the asset cost minus salvage value.

Depreciable amount = Asset cost - Salvage value.

In this case

Depreciable amount = $268,000 - $31,800

=$236,200

The depreciation rate = 1/4 x 100 = 25%

Depreciation per year

=25/100 x $236,200

=$59,050

year Depreciable cost rate Amount

2022 $236,200 25% $59,050

2023 $236,200 25% $59,050

2024 $236,200 25% $59,050

2025 $236,200 25% $59,050

2. Depreciation under the double-declining method.

The double-declining method uses twice the rate of the straight-line depreciation method.

The depreciation rate for the straight-line method is 25%, double-declining will use 50%. The salvage value is $31,800. The asset is depreciated until the salvage value is achieved.

year Depreciable cost rate Amount

2022 $268,000 50% $134,000

2023 $134,000 50% $67,000

2024 $67,000 50% $33,500

2024 $33,500 - $1,700

Balance : salvage value of $31,800

b The straight-line method would have the highest income reported in 2022. It reports less depreciation expense.

c. both Methods will report the same amount of income over the 4 year period.

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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