QUESTION 2 "Three Junes Weaving has just purchased an automated weaving machine and is trying to figure out which depreciation method to use: straight-line, units-of-production, or double-declining-balance

In this question you need to compare the three methods of depreciation i .e Straight Line method , Units of Production and Double- Declining- Balance method . After comparison you need to suggest the controller which depreciation method he should choose.

Answer : Before taking the decision to choose the depreciation method according to the requirements of the organisation, it is better for Ira, the controller , to compare all the three methods of depreciation .

Straight Line Method : This is a simple method of calculating depreciation. Same amount of depreciation is charged throughout the life of asset. But this method is not suitable for the assets which reqire more maintenance and repair with the ages.

Unit- of- Production method : The depreciation expense by this method is assigned equally to each unit produced. This method is mostly applied in the production line. It allows the organisation to charge more depreciation at the time when asset is more productive and needs less maintenance. Depreciation calculated by this method  approximats the usage of asset.

Double Declining Balance method : With this method , the organisation depreciate a large amount in the early years of purchase of asset and less and less on the value of asset over time . Generally machines work smoothly in the early years of purchase but require more repairs and maintenance as the asset ages. Repairs and maintenance expense is a tax deductible expense. By using this method the organisation can write off more depreciation and less maintenance in the earlier years and less depreciation and more repairs and maintenance in the later years for making the annual write-offs and tax expense more stable.

Conclusion : Ira, the controller , should opt Unit-of-Production method of depreciation for the weaving machine because the depreciation calculated by this method approximates the usage of machine and it allows to charge less depreciation when asset needs more maintenance and repairs.