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Required information [The following information applies to the questions displayed below.) Three different companies each purRequired information [The following information applies to the questions displayed below.) Three different companies each purRequired information [The following information applies to the questions displayed below.) Three different companies each purRequired information The following information applies to the questions displayed below.] Three different companies each purc

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Answer #1
Company A Company B Company C
Straight line method Double declining bal. depr. Units of production
Cost $70,000 $70,000 $70,000
Life 4 years 4 years 200,000 miles
Salvage value $5,000 $5,000 $5,000
Depreciation rate 25% 50% 0.325 per miles
Formula ((Cost-salvage value)/useful life)/(cost-salvage value) 1/useful life*2*100 (Cost-salvage value)/estimated life in miles
((70,000-5000)/4)/(70000-5000) 1/4*2*100 (70,000-5,000)/200,000
Revenue $59,000 $59,000 $59,000
Less : Depreciation 31 Dec 2018 $16,250 $35,000 $21,450
(65,000*25%) (70,000*50%) (66,000*0.325)
Net Income $42,750 $24,000 $37,550
Book value of asset $53,750 $35,000 $48,550
(70,000-16,250) (70,000-35,000) (70,000-21,450)
Depreciation 31 Dec. 2019 $16,250 $17,500 $13,325
Depreciation 31 Dec. 2020 $16,250 $8,750 $12,675
Depreciation 31 Dec. 2021 $16,250 $3,750 $17,550
a-1 Company A $42,750
Company B $24,000
Company C $37,550
a-2 Company A will report highest amount of Net Income
c-1 Company A $53,750
Company B $35,000
Company C $48,550
c-2 Highest book value will be reported by Company A
d-1 Company A $171,000 (59000*4-65000)
Company B $171,000 (59000*4-65000)
Company C $171,000 (59000*4-65000)
d-2 All company have the same retained earnings
e The cash flow from operating activities will be Lowest For Company B If income tax is not considered
Depreciation expense is NOT a cashflow item

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