On January 3, 2020, Gagne Inc. paid $320,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $2,500, $6,400 sales tax, and $21,100 for special installation. Management estimates that the computer will remain in service for five years and have a residual value of $20,000. The computer will process 50,000 documents the first year, decreasing annually by 5,000 during each of the next four years (that is 45,000 documents in 2021, 40,000 documents is 2022, and so on). In trying to decide which depreciation method to use, the company president has requested a depreciation schedule for each of three depreciation methods (straight-line, units-of-production, and double-diminishing-balance). Before completing the straight-line depreciation schedule, calculate the straight-line depreciation rate. First, select the labels for the formula and then compute the rate. (Round the rate to two decimal places.) Date January 3, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Asset Cost = Complete the Straight-Line Depreciation Schedule. Begin by filling out the schedule through 2021, and then complete the schedule by entering the amounts through 2024. (Enter the rate to two decimal places. Round all other amounts to the nearest whole dollar.) Straight-Line Depreciation Schedule Depreciation for the Year = CE Depreciation Depreciable Depreciation Cost Rate (SL) Depreciation Rate Accumulated Expense Depreciation Asset Carrying Amount
On January 3, 2020, Gagne Inc. paid $320,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $2,500, $6,400 sales tax, and $21,100 for special installation. Management estimates that the computer will remain in service for five years and have a residual value of $20,000. The computer will process 50,000 documents the first year, decreasing annually by 5,000 during each of the next four years (that is 45,000 documents in 2021, 40,000 documents is 2022, and so on). In trying to decide which depreciation method to use, the company president has requested a depreciation schedule for each of three depreciation methods (straight-line, units-of-production, and double-diminishing-balance). Before completing the straight-line depreciation schedule, calculate the straight-line depreciation rate. First, select the labels for the formula and then compute the rate. (Round the rate to two decimal places.) Date January 3, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Asset Cost = Complete the Straight-Line Depreciation Schedule. Begin by filling out the schedule through 2021, and then complete the schedule by entering the amounts through 2024. (Enter the rate to two decimal places. Round all other amounts to the nearest whole dollar.) Straight-Line Depreciation Schedule Depreciation for the Year = CE Depreciation Depreciable Depreciation Cost Rate (SL) Depreciation Rate Accumulated Expense Depreciation Asset Carrying Amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 3, 2020, Gagne Inc. paid $320,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $2,500, $6,400 sales tax, and $21,100 for special
installation. Management estimates that the computer will remain in service for five years and have a residual value of $20,000. The computer will process 50,000 documents the first year,
decreasing annually by 5,000 during each of the next four years (that is 45,000 documents in 2021, 40,000 documents is 2022, and so on). In trying to decide which depreciation method to use, the
company president has requested a depreciation schedule for each of three depreciation methods (straight-line, units-of-production, and double-diminishing-balance).
Before completing the straight-line depreciation schedule, calculate the straight-line depreciation rate. First, select the labels for the formula and then compute the rate. (Round the rate to two
decimal places.)
Date
January 3, 2020
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023
December 31, 2024
Asset
Cost
B
Complete the Straight-Line Depreciation Schedule. Begin by filling out the schedule through 2021, and then complete the schedule by entering the amounts through 2024. (Enter the rate to two
decimal places. Round all other amounts to the nearest whole dollar.)
Straight-Line Depreciation Schedule
Depreciation for the Year
...
Depreciation Depreciable Depreciation
Rate
Cost
(SL) Depreciation Rate
Accumulated
Expense Depreciation
Asset
Carrying
Amount
Transcribed Image Text:Requirements
1. Prepare a depreciation schedule for each of the three depreciation methods
listed showing asset cost, depreciation expense, accumulated depreciation,
and asset carrying amount.
2. Gagne Inc. reports to shareholders and creditors in the financial statements
using the depreciation method that maximizes reported income in the early
years of asset use. Consider the first year Gagne Inc. uses the computer
system. Identify the depreciation method that meets the company's objectives.
Discuss the advantages of each depreciation method.
Print
n method would allocate
diminim
Done
that maximizes reported income in the first year of the computer's life is the
d allocates the cost of the asset
over its estimated useful life.
US
of the cost of the asset to each of the documents produced. This method woul
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