Depreciation and Rate of Return Burrell Company purchased a machine for $34,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $17,000 each year The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asse Straight-line method. If required, round to one decimal place. 2019 % 2020 2021 2022 2023 Double-declining-balance depreciation method. Round to two decimal places. Round your intermediate dollar value calculations to the nearest whole number. 2019 % 2020 2021 2022 2023 %

Depreciation and Rate of Return Burrell Company purchased a machine for $34,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $17,000 each year The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asse Straight-line method. If required, round to one decimal place. 2019 % 2020 2021 2022 2023 Double-declining-balance depreciation method. Round to two decimal places. Round your intermediate dollar value calculations to the nearest whole number. 2019 % 2020 2021 2022 2023 %

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 2E: Depreciation Methods Sorter Company purchased equipment for 200,000 on January 2, 2019. The...

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On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
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