Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub systemto add to the wellness programs at NGS. The machine was purchasedat the beginning of the year at a cost of $9,500. The estimateduseful life was five years and the residual value was $500. Assumethat the estimated productive life of the machine is 10,000 hours.Expected annual production was year 1, 2,200 hours; year 2, 2,300hours; year 3, 2,400 hours; year 4, 2,100 hours; and year 5, 1,000hours.
Assume NGS sold the hydrotherapy tub system for $2,850 at theend of year 3.The following amounts were forecast for year 3: SalesRevenues $43,000; Cost of Goods Sold $34,000; Other OperatingExpenses $4,300; and Interest Expense $900. Create an incomestatement for year 3 for each of the different depreciationmethods, ending at Income before Income Tax Expense. (Don't forgetto include a loss or gain on disposal for each method.).
