On January 2, 2018, the Bradley Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows:
Purchase price ………………………….. $154,000
Freight charges ………………………….. 2,000
Installation charges ……………………… 4,000
Bradley’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life.
Required:
1. Calculate depreciation for each year of the asset’s eight-year life.
2. Discuss the accounting treatment of the depreciation on the equipment.
