Seligram Case (10 points). The following exhibit is taken from the Seligram Case. Exhibit 7...
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Accounting
Seligram Case (10 points). The following exhibit is taken from the Seligram Case. Exhibit 7 Seligram, Inc.: Electronic Testing Operations Cost: Useful Life: Depreciation Method: Location: Utilization: New Testing Equipment Economics and Operating Characteristics $2 Million 8 Years Double Declining Balance (First Year Depreciation Costs of $500,000) Main Test Room 10% first year, rising to 60% by third year and in all subsequent years, based on 4,000 hours per year availability (2 shifts x 2,000-hour year) Approximately five minutes per hour of operation; average labor rate of $30 per hour $75,000 in installation and programming costs in first year Direct Labor Requirements: Engineering Requirements: Estimated overhead (nonengineering depreciation) $250,000 ($100,000 variable, $150,000 fixed) Seligram applies the double declining balance depreciation method to the new testing equipment. Do you agree with the choice of double declining depreciation method over the strait-line method? Describe the main differences between the two depreciation methods. Which method would you recommend to Seligram for its cost accounting system? For its tax reporting? For its financial reporting? Your answer should be concise and restricted to the space below
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