Calculate Depreciation. A Machine Cost $800,000 on April 1, 2014. Its Estimated

question 5

Essay

Calculate depreciation.
A machine cost $800,000 on April 1, 2014. Its estimated salvage value is $80,000 and its expected life is eight years.

Instructions
(1) Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.

(a) Straight-line for 2014
(b) Double-declining balance for 2015
(c) Sum-of-the-years'-digits for 2015
(2) Which method would result in the smallest income amount for 2015?

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Definitions:

Income Effect

The change in an individual's or economy's purchasing power due to a change in income, affecting the quantity of goods and services bought.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource.

Dual Labor Market Theory

An economic theory that suggests the labor market is divided into two segments: the primary market, with secure, well-paid jobs, and the secondary market, characterized by low pay, job insecurity, and little room for advancement.

Backward-Bending

Refers to the backward-bending supply curve of labor, indicating that at some point, higher wages lead to a decrease in the labor supply.