9: $100,000 2020: $70,000 2021: $120,000 Company purchased assets costing $120,000 on January 1, 2019. The assets have a three year useful life and no salvage value. For tax poses the Company used an acceptable accelerated depreciation method that resulted in depreciation expense of $55,000; $40,000; and 6,000 for the three years respectively. For financial reporting purposes the straightline method was used. A 20% tax rate was in effect for three years. tructions: pare the necessary calculations and make the end of year entries for the Holden Company for the years 2019, 2020, 2021.
9: $100,000 2020: $70,000 2021: $120,000 Company purchased assets costing $120,000 on January 1, 2019. The assets have a three year useful life and no salvage value. For tax poses the Company used an acceptable accelerated depreciation method that resulted in depreciation expense of $55,000; $40,000; and 6,000 for the three years respectively. For financial reporting purposes the straightline method was used. A 20% tax rate was in effect for three years. tructions: pare the necessary calculations and make the end of year entries for the Holden Company for the years 2019, 2020, 2021.
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:Holder Company reported the following net income before taxes and depreciation for the years indicated.
2019: $100,000 2020: $70,000 2021: $120,000
The Company purchased assets costing $120,000 on January 1, 2019. The assets have a three year useful life and no salvage value. For tax
purposes the Company used an acceptable accelerated depreciation method that resulted in depreciation expense of $55,000; $40,000; and
$25,000 for the three years respectively. For financial reporting purposes the straightline method was used. A 20% tax rate was in effect for
the three years.
Instructions:
Prepare the necessary calculations and make the end of year entries for the Holden Company for the years 2019, 2020, 2021.
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