18). During prior periods, the Rocket Company used the double-declining balance method for depreciating its equipment, but in 2010 it decided to switch to the straight-line method. The equipment was purchased in 2008 for $1,000,000 and had a 10-year life. The balance in the accumulated depreciation account for equipment at the beginning of 2010 was $360,000. How will 2010's net income be changed by switching to the new depreciation if Rocket has an effective tax rate of 40 percent. O $ 60,000 smaller O $16,800 larger O $28,000 larger O $40,000 smaller
18). During prior periods, the Rocket Company used the double-declining balance method for depreciating its equipment, but in 2010 it decided to switch to the straight-line method. The equipment was purchased in 2008 for $1,000,000 and had a 10-year life. The balance in the accumulated depreciation account for equipment at the beginning of 2010 was $360,000. How will 2010's net income be changed by switching to the new depreciation if Rocket has an effective tax rate of 40 percent. O $ 60,000 smaller O $16,800 larger O $28,000 larger O $40,000 smaller
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:18) . During prior periods, the Rocket Company used the double-declining balance method
for
depreciating its equipment, but in 2010 it decided to switch to the straight-line
method.
The equipment was purchased in 2008 for $1,000,000 and had a 10-year life. The
balance in the accumulated depreciation account for equipment at the beginning of
2010
was $360,000. How will 2010's net income be changed by switching to the new
depreciation if Rocket has an effective tax rate of 40 percent.
O $ 60,000
smaller
O $16,800 larger
O $28,000 larger
O $40,000
smaller
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