Burrell Company purchased a machine for $10,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $5,000 each year. The tax rate is 20%. Compute the rate of return earned on the average net asset value by the company each year of the asset's life under the double declining balance depreciation method for the following years: 2019: 2020: 2021: 2022: 2023:
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.
Burrell Company purchased a machine for $10,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before
Compute the
2019:
2020:
2021:
2022:
2023:
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