3. A profitable company making earthmoving equipment is considering a research investment of $100K on equipment that will have a 5 year useful and $20K salvage value. If the money is worth 10%, which one of the following methods of depreciation would be preferable? a) Straight line b) Sum of years' digits c) Double declining balance d) Modified accelerated cost recovery system

3. A profitable company making earthmoving equipment is considering a research investment of $100K on equipment that will have a 5 year useful and $20K salvage value. If the money is worth 10%, which one of the following methods of depreciation would be preferable? a) Straight line b) Sum of years' digits c) Double declining balance d) Modified accelerated cost recovery system

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Description: 3. A profitable company making earthmoving equipment is considering a research investment of $100Kon equipment that will have a 5 year useful and $20K salvage value. If the money is worth 10%, whichone of the following methods of depreciation would

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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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3. A profitable company making earthmoving equipment is considering a research investment of $100K
on equipment that will have a 5 year useful and $20K salvage value. If the money is worth 10%, which
one of the following methods of depreciation would be preferable?
a) Straight line
b) Sum of years' digits
c) Double declining balance
d) Modified accelerated cost recovery system

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