Homework Answers
a1) Straight line depreciation = (95000-15000/5) = 16000
a2) Depreciation expense
| Double decline balance | |
| Year 1 | 95000*40% = 38000 |
| Year 2 | 95000*60%*40% = 22800 |
| Year 3 | 34200*40% = 13680 |
| Year 4 | 5520 |
| Year 5 | 0 |
b) Accounting equation
| Balance Sheet | Income statement | |||||||||
| Assets | Stockholder's equity | |||||||||
| Cash | + | Book value of computer system | = | Retained earnings | Revenue | - | Expense | = | Net income | Statement of Cash flows |
| -95000 | 95000 | -95000 IA | ||||||||
| Straight line Depreciation | ||||||||||
| -16000 | -16000 | -16000 | -16000 | |||||||
| Double declining balance depreciation | ||||||||||
| -38000 | -38000 | -38000 | -38000 | |||||||
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