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Consider the following scenario: • Cost of Asset: $975,000 Depreciable Life in Years , N: 6 • Salvage Value, S: $775,000

Consider the following scenario: • Cost of Asset: $975,000 Depreciable Life in Years , N: 6 • Salvage Value, S: $775,000

FINANCIAL ACCOUNTING
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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Consider the following scenario: • Cost of Asset: $975,000 Depreciable Life in Years , N: 6 Salvage Value, S: $775,000 1. What would be the depreciation on year 4; if you use SLD? 2. What would be the book value on year 3; if you use SLD? 3. How would the answer for questions 1 and 2 compare if you use SOYD? 4. What would be the advantages/disadvantages of using SLD vs SOYD? 5. Why would you say that if you use Declining Balance, there are no guarantee that the Book Value at the end of the depreciation schedule would not equal the Salvage Value?
Transcribed Image Text:Consider the following scenario: • Cost of Asset: $975,000 Depreciable Life in Years , N: 6 Salvage Value, S: $775,000 1. What would be the depreciation on year 4; if you use SLD? 2. What would be the book value on year 3; if you use SLD? 3. How would the answer for questions 1 and 2 compare if you use SOYD? 4. What would be the advantages/disadvantages of using SLD vs SOYD? 5. Why would you say that if you use Declining Balance, there are no guarantee that the Book Value at the end of the depreciation schedule would not equal the Salvage Value?
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