Question

Problem 9-09A Monty Corporation purchased machinery on January 1, 2022, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $32,000. The company is considering different depreciation methods that could be used for financial reporting purposes. Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Accumulated Years Depreciable Cost * Depreciation Rate - Annual Depreciation Expense Book Ve 2022 2023 2024 2025 DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Book Value Beginning of Depreciation Rate - Annual Depreciation Expense Accumulated Depreciation Years 2022 2024 2025 Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value. Which method would result in the higher reported 2022 income? In the highest total reported income over the 4-year period? UNT TEXT Which method would result in the lower reported 2022 income? In the lowest total reported income over the 4-year period?

Answer 1

Date: Solution! Straight line Depreciation on altro Computation : - end of year Tabookostele luseful life Rep. exp. Acc. Dep. Book Walne 1 Year 62 $270000 | uym. 1959,500 $59.900 $ 210, 500 2023 $ 210, 500 $ 59,500 $ 119,000 $151,000 2094 3151,000 Iu ! $ 59,500 $178 500891, som 2025 391,000 14 1159,500 $238,000 $32,000 $ 238,000 Cost = $220.000 videos need Life = uyasi t Saliuage value = $ 32,000 Dºp, P.0 . = ( 2 50 – 3200014 = $59.500 Scamedhih Lam Scanner

Double Declining - Balance Depreciation I computation I End of Year Year TB.uolue bog. Dee Annual Rep Acc. Dep. | Book Value 2022 | 220.000 50% 1,35,000 1,35.000 135,000 2023: 1135, ovo 50%. 67,500 202,500 | 67,500 2024 67,500 50% 33,750 | 236,250 | 33,750 2025 3 3,750 | 501 1250 238,000 32,000 3238000 Cost = $ 270,000 Salvaxe value = $32,000 üfe - u yos. . Dep. rate = 100% X 2 = 50° Scanned with CamScanner
Straight line method will result in higher reported 2022 income as compared to Double declining method. The pre tax difference in income will be $(135,000-59,500)=$75,500.

Both the method will result in the same total income over the period of 4 years.