Depreciation and Rate of Return Burrell Company purchased a machine for $33,000 on January 2, 2016. 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 $16,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 25 2017 32.14 % 2018 45 2019 75 2020 225 Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 2017 2018 2019 2020 %

Depreciation and Rate of Return Burrell Company purchased a machine for $33,000 on January 2, 2016. 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 $16,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 25 2017 32.14 % 2018 45 2019 75 2020 225 Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 2017 2018 2019 2020 %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Depreciation and Rate of Return
Burrell Company purchased a machine for $33,000 on January 2, 2016. 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 $16,500 each year. The tax
rate is 25%.
Required:
Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset.
Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places.
2016
25
%
2017
32.14
2018
45 %
2019
75 %
2020
225
Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places.
2016
%
2017
2018
2019
%
2020
%

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