Asked by estefani Ramirez on Jun 15, 2024
Verified
Hubbard Company purchased a truck on January 1,2018,at a cost of $34,000.The company estimated that the truck would have a useful life of 4 years and a residual value of $4,000.
A.Calculate depreciation expense under straight line and double declining balance for 2018-2021.
B.Which of the two methods would result in lower net income in 2018 and 2021?
Double Declining Balance
An accelerated method of depreciation which doubles the rate at which an asset is depreciated compared to the straight-line method.
- Evaluate and determine the reduction in value of assets by employing methods like straight-line, double-declining balance, and units-of-production techniques.
Verified Answer
MA
Muhamad AzamuddinJun 20, 2024
Final Answer :
A.
Straight-line: ($34,000 - 4,000)÷ 4 years = $7,500.
Declining-balance:
2018 2/4 = $17,000.
2019 ($34,000 - $17,000)× 2/4 = $8,500.
2020 ($34,000 - $25,500)× 2/4 = $4,250.
2021 Book value $4,250 - $4,000 residual value = $250.
B.Lower net income: 2018,double declining-balance;2021,straight-line.
Straight-line: ($34,000 - 4,000)÷ 4 years = $7,500.Declining-balance:
2018 2/4 = $17,000.
2019 ($34,000 - $17,000)× 2/4 = $8,500.
2020 ($34,000 - $25,500)× 2/4 = $4,250.
2021 Book value $4,250 - $4,000 residual value = $250.
B.Lower net income: 2018,double declining-balance;2021,straight-line.
Learning Objectives
- Evaluate and determine the reduction in value of assets by employing methods like straight-line, double-declining balance, and units-of-production techniques.
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