Question

uy WORK On August 3, Cinco Construction purchased special-purpose equipment at a cost of $5,239,900. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $37,830. a. Compute the depreciation expense to be recognized each calendar year for! financial reporting purposes under the straight-line depreciation method (half- year convention). b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (straight-line or double-declining balance) results in the highest net income for financial reporting purposes during the first two years of the equipment's use? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the depreciation expense to be recognized each calendar year for financia depreciation method (half-year convention). (Adjust year 9 depreciation, if necessa equals depreciable value of the asset. Do not round intermediate calculations and r whole number)

Answer 1

Answers a) Depreciation expense under straight line depreciation: Year > A لي م A که . Depreciation $ 270,941 $ 650,259 $ 6501259 $.650.259 $ 656.259 $ 650,259 $ 650,259 · $ 650,259 $ 379,316 مه ف م م م

Explanation's D under straight line Depreciation Method = percentage of Depreciation * 100% .. = 12.5% 2) Year 1 Depreciation (cost-Residual value) x percentage y Of Depreciation чKD. months 12 =($5,239,900 – $37,850)X12:51. X = $270,941 3 years to year & pex year Depreciation = since half year. convention, Depre- ciation per half year will be =($5,239.900-$37,830) +12.5:); x 6 = $325, 129.375

per year Depreciation $325, 129.57542 = $650,259 from year 2 to year 8 per year depreciation is $650,259- 4) Depreciation . for 9th gear Depreciations from year 2 to Lost- Residuall. Depreciation value - in year 1 year 8 =($5,239,900 - $37,830) -$270, qu1 .-($650,259x7) = $5,202,870-$270,941-$1,551,813 = $.379,316; - 316.

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