Question

Answer the following questions concerning the choice of depreciation method for an asset that has a 10-year life. Select your answer by clicking in the drop down box to the right of each question.

Which depreciation method will show the highest amount of income tax expense in the first year of owning the asset?

      [ Choose ]            double-declining balance or straight-line      

Which depreciation method will show the higher book value of the asset at the end of the first year?

      [ Choose ]            double-declining balance or straight-line      

Which depreciation method would most likely result in a gain if the asset was sold at the end of the third year of ownership?

   [ Choose ]   double-declining balance or straight-line   

Answer 1

I have explained with example for better understanding .Thank you

1. Double declining method

2. Straight line method

​​​​​3.Double declining method
Cost of Asset = 110,00 Salvage value – 10,000 life = logu sepse sold asset after 3 years ie end of syear = 80.000 Deprecahon rate. 10,000 - 10,000 to Double declining -- 10,000 70x100 method = 2x10% 1,09000 = 20% Straight line = 10% Double Decliners Depreciation 22000 (1,101000X10%) (1,10,000x20%) method Straight line 11,000 O DOUBLE DECLINING BALANCE METHOD will show hohert amount of Income tax expense in first year of owning the asset. seo, 22000 straight line Double Declining Book value at 99,000000 88000 the end of yea (1,10,000 – 18:000) (1,100,000 - 22000) 56320 77000 * Under straight line method will as how higher book value of the asset end of 1st year le., 99000. straight line Double Deckning Geo Book walce at the end of 33 - (1410,000 - 18.000-11,000 - (1,10,000 -20%-20%-20%) sold asset at the ender yz 80,000 . Gain 3000 !Double declining balance method would most' Ipbely result is gain at end of 11,000 80,000 23680

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