11. Straight-line depreciation A) results in higher net income numbers in early years than accelerated methods. results in higher expense in early years than accelerated methods. C) results in less total depreciation during the entire life of an asset than accelerated methods. results in a lower tax burden in early years. B) D)
Related questions
Rembrandt Company acquired a plant asset at the beginning ofYear 1. The asset has an estimated service life of 5 years. Anemployee has prepared depreciation schedules for this asset usingthree different methods to compare the results of using one methodwith the results of using other methods. You are to assume that thefollowing schedules have been correctly prepared for this assetusing (1) the straight-line method, (2) thesum-of-the-years'-digits method, and (3) thedouble-declining-balance method.
Year | Straight-Line | Sum-of-the- | Double-Declining- | |||||||||
| 1 | $15,210 | $25,350 | $33,800 | |||||||||
| 2 | 15,210 | 20,280 | 20,280 | |||||||||
| 3 | 15,210 | 15,210 | 12,168 | |||||||||
| 4 | 15,210 | 10,140 | 7,301 | |||||||||
| 5 | 15,210 | 5,070 | 2,501 | |||||||||
| Total | $76,050 | $76,050 | $76,050 | |||||||||
What is the cost of the asset being depreciated?
What amount, if any, was used in the depreciation calculationsfor the salvage value for this asset
Depreciation by Three Methods; Partial Years
Perdue Company purchased equipment on April 1 for $48,870. The equipment was expected to have a useful life of three years, or 4,320 operating hours, and a residual value of $1,350. The equipment was used for 800 hours during Year 1, 1,500 hours in Year 2, 1,300 hours in Year 3, and 720 hours in Year 4.
Required:
Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-output method, and (c) the double-declining-balance method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.
a. Straight-line method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
b. Units-of-output method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
c. Double-declining-balance method
| Year | Amount |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
Feedback
Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation.
Annual units-of-output depreciation allocates the cost of the asset equally over the units produced (hours).
The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation.
Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method.
Learning Objective 2.
