### Changing DepreciationKam Company purchased a machine on January 2, 2019, for $20,000. The machine had an expected life of 8 years and a residual value of $300. The double-declining-balance method of depreciation is used.#### Required:(If required, round to the nearest dollar.)1. **Compute the depreciation expense for each year of the asset's life and book value at the end of each year.**| Year | Depreciation Expense | Book Value ||------|----------------------|------------|| 2019 | $5,000 | $15,000 ✓ || 2020 | $3,750 | $11,250 ✓ || 2021 | $2,813 | $8,437 ✓ || 2022 | $2,109 | $6,328 ✓ || 2023 | $1,582 | $4,746 ✓ || 2024 | $1,187 | $3,559 ✓ || 2025 | $890 | $2,669 ✓ || 2026 | $300 | $300 ✗ |### Explanation:- **Double-Declining-Balance Method**: This method accelerates depreciation, resulting in higher expenses in the earlier years and lower expenses in later years.- **Residual Value**: The remaining value of the asset at the end of its useful life is $300.- **Annual Calculation**: - The depreciation expense decreases each year, which corresponds with a declining book value. - In 2026, the depreciation expense correctly matches the residual value, but exceeds the calculated expense, hence the "✗".This table provides an annual breakdown of depreciation expenses and helps visualize how the asset's value declines over time using the double-declining method. ### Depreciation Computation Methodologies#### 2. Midpoint Change to Straight-Line MethodAssuming the company has a policy of changing to the straight-line method at the midpoint of the asset's life, compute depreciation using the double-declining-balance for the first four years, then switch to straight-line.- **2019: $5,000** ✅- **2020: $3,750** ✅- **2021: $2,813** ✅- **2022: $2,109** ✅- **2023: $1,582** ❌- **2024: $1,187** ❌- **2025: $890** ❌- **2026: $20,000** ❌### 3. Beginning of Year Change to Straight-Line MethodAssuming the company changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining balance, compute depreciation for each year.- **2019: $5,000** ✅- **2020: $8,750** ❌- **2021: $11,563** ❌- **2022: $13,672** ❌- **2023: $13,672** ❌- **2024: $15,254** ❌- **2025: $16,441** ❌- **2026: $20,000** ❌### ExplanationThe numbers represent depreciation expenses for each year. A checkmark indicates the correct application of the depreciation method, while an "X" signifies an incorrect computation. These methods illustrate how different strategies can alter financial reporting outcomes based on asset depreciation calculations.

Name: ### Changing DepreciationKam Company purchased a machine on January 2
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Description: ### Changing DepreciationKam Company purchased a machine on January 2, 2019, for $20,000. The machine had an expected life of 8 years and a residual value of $300. The double-declining-balance method of depreciation is used.#### Required:(If require

Lets understand the basics. Depreciation is a reduction is value due to wear and tear, technological…

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Kam Company purchased a machine on January 2, 2019, for $20,000. The machine had an expected life of 8 years and a residual value of $300. The double-declin balance method of depreciation is used. Required: (If required, round to the nearest dollar.) 1. Compute the depreciation expense for each year of the asset's life and book value at the end of each year. 2019 $ 2020 $ 2021 $ 2022 $ 2023 $ Depreciation Expense 5,000 $ 15,000 ✓ 3,750 $ 11,250 2,813 $ 2,109 ✓ $ 1,582 ✓ $ Book value 8,437 6,328 4,746 ✔

Kam Company purchased a machine on January 2, 2019, for $20,000. The machine had an expected life of 8 years and a residual value of $300. The double-declin balance method of depreciation is used. Required: (If required, round to the nearest dollar.) 1. Compute the depreciation expense for each year of the asset's life and book value at the end of each year. 2019 $ 2020 $ 2021 $ 2022 $ 2023 $ Depreciation Expense 5,000 $ 15,000 ✓ 3,750 $ 11,250 2,813 $ 2,109 ✓ $ 1,582 ✓ $ Book value 8,437 6,328 4,746 ✔

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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