Fi504 - Accounting and Finance: Managerial Use and Analysis
A)
Straight-line Depreciation
Computation End of Year Year DC X DR = ADE AD BV 2012 220,000 25% 55,000 55,000 195,000 2013 220,000 25% 55,000 110,000 140,000 2014 220,000 25% 55,000 165,000 85,000 2015 220,000 25% 55,000 220,000 30,000
($250,000 – $30,000) 1/4 = 25%
Please note abbreviations are the same as bellow
Double- Declining-Balance Depreciation
Computation End of Year Book Value Annual From the beginning Depreciation Depreciation Accumulated Book Year of year X Rate (DR) = Expense (ADE) Depreciation (AD) Value (BV) 2012 $250,000 50%* $125,000 $125,000 $125,000 2013 125,000 50% 62,500 187,500 62,500 2014 62,500 50% 31,250 218,750 31,250 2015 31,250 50% 1,250** 220,000 30,000
(1/4) X 2 = 50%
B)
Which method would result in the higher reported 2012 income? In the highest total reported income over the 4-year period?
The method that would result in the higher reported income would be the Straight-line depreciation because the depreciation expense. Within he years reported, both methods have the same amount of depreciation expense and would not differentiate within that four year period.
C)
Which method would result in the lower reported 2012 income? In the lowest total reported income over the 4-year period?
If the straight-line depreciation provides the higher amount for depreciation then the double-declining balance would provide the lower 2012 income. However, this would not change the results of the total income over the 4-year period. Both methods would produce the same total income at the end of the 4-year
Straight-line Depreciation
Computation End of Year Year DC X DR = ADE AD BV 2012 220,000 25% 55,000 55,000 195,000 2013 220,000 25% 55,000 110,000 140,000 2014 220,000 25% 55,000 165,000 85,000 2015 220,000 25% 55,000 220,000 30,000
($250,000 – $30,000) 1/4 = 25%
Please note abbreviations are the same as bellow
Double- Declining-Balance Depreciation
Computation End of Year Book Value Annual From the beginning Depreciation Depreciation Accumulated Book Year of year X Rate (DR) = Expense (ADE) Depreciation (AD) Value (BV) 2012 $250,000 50%* $125,000 $125,000 $125,000 2013 125,000 50% 62,500 187,500 62,500 2014 62,500 50% 31,250 218,750 31,250 2015 31,250 50% 1,250** 220,000 30,000
(1/4) X 2 = 50%
B)
Which method would result in the higher reported 2012 income? In the highest total reported income over the 4-year period?
The method that would result in the higher reported income would be the Straight-line depreciation because the depreciation expense. Within he years reported, both methods have the same amount of depreciation expense and would not differentiate within that four year period.
C)
Which method would result in the lower reported 2012 income? In the lowest total reported income over the 4-year period?
If the straight-line depreciation provides the higher amount for depreciation then the double-declining balance would provide the lower 2012 income. However, this would not change the results of the total income over the 4-year period. Both methods would produce the same total income at the end of the 4-year