Part B 5) Beckman Enterprises purchased a depreciable asset on October 1, Year 1
ID: 2509795 • Letter: P
Question
Part B5) Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be: A) $36,000 B) $42,000 C) $54,000 D) $16,000 E) $90,000 6) Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, Year 3? A) $5,000 B) S15,000 C) $15,125 D) $20,000 E) $13,750 7) A benefit of using an accelerated depreciation method is that: A) It is preferred by the tax code. B) It is the simplest method to calculate. C) It yields larger depreciation expense in the early years of an asset's life. D) It yields a higher income in the early years of the asset's useful life. E) The results are identical to straight-line depreciation
Explanation / Answer
CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Depreciable Assets= $ 1,00,000.00 Useful Life = 5 years Depreciation per year = $ 20,000.00 (Purchase price / Useful life) Rate of Depreciation = 0.20 or 20% (Depreication / Purchase price ) Double decline deprection rate = 20% * 2 = 40.0% Purchase value as on October - 01, Year 1 $ 1,00,000.00 Depreciation for the year 1 @ 40% X 3 / 12 $ 10,000.00 Closing balance for the year 1 $ 90,000.00 Opening Balance for the year 2 $ 90,000.00 Depreciation for the year 2 @ 40% $ 36,000.00 Closing balance for the year 2 $ 54,000.00 Annual Period Beginning of period of Book Value Depreciation Rate Partial Year Depreciation Expenses Accumulated Depreciation Book Value 2016 $ 1,00,000 40% 10.00% $ 10,000 $ 10,000 $ 90,000 2017 $ 90,000 40% 0 $ 36,000 $ 46,000 $ 54,000 Answer = Option C = $ 54,000 Note: As per the chegg answering guideline I have to answer only first question in multiple question.