This assignment analyzes depreciation methods for Masterton Ltd's machinery acquisition, evaluating straight-line, diminishing balance, sum of years digits, and units of production methods. The solution includes detailed calculations, formulas, and schedules to determine annual depreciation expense, accumulated depreciation, and year-end carrying amounts for each method. It assesses the impact of each method on total annual cost and profit after depreciation, considering repairs, maintenance, and profit before depreciation. Furthermore, the assignment compares the financial implications of purchasing the machinery versus leasing it, including a cash flow analysis. The document also discusses the advantages and disadvantages of each depreciation method, and concludes that the units of production method is most appropriate. The document is supported by references to academic literature.
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