On January 1, Year 1, Warren Co. purchased a machine for $120,000. Warren estimated the useful life of the machine to be 10 years and the salvage value to be $20,000. Indicate whether each of the following statements is true or false.________ a) Depreciation expense for Year 1 under the straight-line method would be $12,000.________ b) Depreciation expense for Year 1 under the double declining method would be $24,000.________ c) The accumulated depreciation at the end of Year 2 under the straight-line method would be $20,000.________ d) The accumulated depreciation at the end of Year 2 under the double declining method would be $48,000.________ e) The book value of the machine under both the double declining method and the straight-line method at the end of 10 years would be $20,000.
What will be an ideal response?
a) F b) T c) T d) F e) T
a) This is false. Annual depreciation expense = ($120,000 ? $20,000) ÷ 10 years = $10,000
b) This is true. Year 1 Depreciation expense = $120,000 × (2 × 10%) = $24,000
c) This is true. Accumulated depreciation at the end of Year 2 = $10,000 annual depreciation × 2 years = $20,000
d) This is false. Year 1 Depreciation expense = $120,000 × (2 × 10%) = $24,000; Year 2 Depreciation expense = ($120,000 ? $24,000) × (2 × 10%) = $19,200; Accumulated depreciation at end of Year 2 = $24,000 + $19,200 = $43,200
e) This is true. Regardless of depreciation method, the book value of an asset will be equal to its salvage value at the end of its useful life.
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What will be an ideal response?
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