Question

Randall Inc. has a popular line of beaded jewellery, Randall reported net earnings of $20,000 for 2017. Randall depreciates furniture, fixtures, equipment, and automotive assets on a straight-line basis over five years and assumes no residual value. Depreciation expense for the year totalled $1,300, and the assets are four years old. What would net income be for 2017 if Randall used the double-diminishing-balance (DDB) method instead? The company's income tax rate is 20%. How does management choose which depreciation method to use? What would net income be for 2017 if Randall used the double-diminishing-balance (DDB) method instead? The company's income tax rate is 20%. Begin by computing the cost of the furniture, fixtures, equipment, and automotive assets The cost of the furniture, fixtures, equipment, and automotive assets is $ 7. Next, complete the table below to compute the net income for 2017 under double-diminishing-balance (DDB) depreciation. (Use parentheses or a minus sign to indicate numbers that are to be subtracted. Round all amounts to the nearest whole dollar.) Net income under straight-line depreciation Difference in depreciation: Straight line depreciation as reported DDB depreciation for 2017 Change in depreciation expense Change in income tax Net income for 2017 using DDB depreciation How does management choose which depreciation method to use? V method should be used. The method is suited for those assets that wear out due to physical metho Management chooses the use while the V method that reflects the pattern in which the asset will be used. For example, if the asset generates revenue evenly over time, the V method is best for assets that generate greater amounts of revenue earlier in their useful lives.