Tory Enterprises pays $241,800 for equipment that will last five years and have
ID: 2478945 • Letter: T
Question
Tory Enterprises pays $241,800 for equipment that will last five years and have a $45,300 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,200 annually, after deducting all expenses except depreciation. (Round your answers to the nearest whole dollar.)
Calculate annual depreciation expenses using double-declining-balance method.
Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation. (Net loss should be indicated with a minus sign.)
Tory Enterprises pays $241,800 for equipment that will last five years and have a $45,300 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,200 annually, after deducting all expenses except depreciation. (Round your answers to the nearest whole dollar.)
Explanation / Answer
Calculation of the Depreciation Expense Double Declining Method Depreciation per year ( Cost- Salvage)/Life (241800-45300)/5 39300 Rate 39300/196500 20% Double Declining rate 20%*2 = 40% Year Book Value Depreciation Cl. Value 1 241800 96720 (241800*40%) 145080 2 145080 58032 (145080*40%) 87048 3 87048 34819 52229 4 52229 6929 (241800-189571-45300) 45300 5 45300 0 45300 I 1 2 3 4 5 Income before Depreciation 90200 90200 90200 90200 90200 Depreciation 96720 58032 34819 6929 0 Net Pretax Income -6520 32168 55381 83271 90200