Novak Corporation purchased machinery on January 1, 2017, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $24,000. The company is considering different depreciation methods that could be used for financial reporting purposes. Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation End of Year Years Depreciable Cost x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value 2017 $ $1 2$ 2018 2019 % 2020 % DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Years Book Value Beginning of Year x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value 2017 $ 2018 2019 2020 9,750 * Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value. LINK TΟ ΤΕXT LINK Tο ΤΕXT Which method would result in the higher reported 2017 income? In the highest total reported income over the 4-year period? LINK TO TEXT LINK TO TEXT Which method would result in the lower reported 2017 income? In the lowest total reported income over the 4-year period?
Novak Corporation purchased machinery on January 1, 2017, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $24,000. The company is considering different depreciation methods that could be used for financial reporting purposes. Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation End of Year Years Depreciable Cost x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value 2017 $ $1 2$ 2018 2019 % 2020 % DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Years Book Value Beginning of Year x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value 2017 $ 2018 2019 2020 9,750 * Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value. LINK TΟ ΤΕXT LINK Tο ΤΕXT Which method would result in the higher reported 2017 income? In the highest total reported income over the 4-year period? LINK TO TEXT LINK TO TEXT Which method would result in the lower reported 2017 income? In the lowest total reported income over the 4-year period?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Novak Corporation purchased machinery on January 1, 2017, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $24,000. The company is considering different depreciation methods that could be used
for financial reporting purposes.
Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.
STRAIGHT-LINE DEPRECIATION
Computation
End of Year
Years Depreciable Cost x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value
2017
$
$1
2$
2018
2019
%
2020
%
DOUBLE-DECLINING-BALANCE DEPRECIATION
Computation
End of Year
Years Book Value Beginning of Year x Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value
2017
$
2018
2019
2020
9,750 *
Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value.
LINK TΟ ΤΕXT LINK Tο ΤΕXT
Which method would result in the higher reported 2017 income? In the highest total reported income over the 4-year period?
LINK TO TEXT LINK TO TEXT
Which method would result in the lower reported 2017 income? In the lowest total reported income over the 4-year period?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 4 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education