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On January 4, 2021, Brown Company paid $270,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $1,800, sales tax of $6,900, and $31,300 for a special platform on which to place the computer. Brown's management estimates that the computer will remain in service for five years and have a residual value of $35,000. The computer will process 30,000 documents the first year, with annual processing decreasing by 2,500 documents during each of the next four years (that is, 27,500 documents in 2022; 25,000 documents in 2023; and so on). For help with deciding which depreciation method to use, the company president has requested a depreciation schedule for each of the three depreciation methods. If rounding is necessary, use two decimal places for the depreciation amount per document. Read the requirements. Requirement 1. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Complete the straight-line depreciation schedule. Begin by filling out the schedule through 2022, and then complete the schedule by entering the amounts through 2025. (Enter the rate to two decimal places.) Date January 4, 2021 December 31, 2021 December 31, 2022 Cost 310000 Straight-Line Depreciation Schedule Depreciable Cost Rate 0.20 0.20 Yearly Expense 62000 62000 Accumulated Depreciation 62000 Book Value 310000 248000

On January 4, 2021, Brown Company paid $270,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $1,800, sales tax of $6,900, and $31,300 for a special platform on which to place the computer. Brown's management estimates that the computer will remain in service for five years and have a residual value of $35,000. The computer will process 30,000 documents the first year, with annual processing decreasing by 2,500 documents during each of the next four years (that is, 27,500 documents in 2022; 25,000 documents in 2023; and so on). For help with deciding which depreciation method to use, the company president has requested a depreciation schedule for each of the three depreciation methods. If rounding is necessary, use two decimal places for the depreciation amount per document. Read the requirements. Requirement 1. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Complete the straight-line depreciation schedule. Begin by filling out the schedule through 2022, and then complete the schedule by entering the amounts through 2025. (Enter the rate to two decimal places.) Date January 4, 2021 December 31, 2021 December 31, 2022 Cost 310000 Straight-Line Depreciation Schedule Depreciable Cost Rate 0.20 0.20 Yearly Expense 62000 62000 Accumulated Depreciation 62000 Book Value 310000 248000

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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Requirements 1. 2. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For financial reporting purposes, Brown uses the depreciation method that maximizes reported income in the early years of an asset's use. For income tax purposes, the company uses the depreciation method that minimizes income tax payments in those early years. Consider the first year Brown Co. uses the computer. Identify the depreciation methods that meet Brown's objectives, assuming the income tax authorities permit the use of any of the methods. 3. Net cash provided by operations before income tax is $150,000 for the computer's first year. The company's income tax rate is 35%. For the two depreciation methods identified in requirement 2, compare the net income and net cash provided by operations (cash flow). Show which method gives the net income advantage and which method gives the cash flow advantage. Print Done X
Transcribed Image Text:Requirements 1. 2. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. For financial reporting purposes, Brown uses the depreciation method that maximizes reported income in the early years of an asset's use. For income tax purposes, the company uses the depreciation method that minimizes income tax payments in those early years. Consider the first year Brown Co. uses the computer. Identify the depreciation methods that meet Brown's objectives, assuming the income tax authorities permit the use of any of the methods. 3. Net cash provided by operations before income tax is $150,000 for the computer's first year. The company's income tax rate is 35%. For the two depreciation methods identified in requirement 2, compare the net income and net cash provided by operations (cash flow). Show which method gives the net income advantage and which method gives the cash flow advantage. Print Done X
On January 4, 2021, Brown Company paid $270,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $1,800, sales tax of $6,900, and $31,300 for a special platform on which to place the computer. Brown's management estimates that the computer will remain in service for five years and have a residual value of $35,000. The computer will process 30,000 documents the first year, with annual processing decreasing by 2,500 documents during each of the next four years (that is, 27,500 documents in 2022; 25,000 documents in 2023; and so on). For help with deciding which depreciation method to use, the company president has requested a depreciation schedule for each of the three depreciation methods. If rounding is necessary, use two decimal places for the depreciation amount per document. Read the requirements. Requirement 1. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Complete the straight-line depreciation schedule. Begin by filling out the schedule through 2022, and then complete the schedule by entering the amounts through 2025. (Enter the rate to two decimal places.) Date January 4, 2021 December 31, 2021 December 31, 2022 Cost 310000 Straight-Line Depreciation Schedule Depreciable Cost Rate 0.20 0.20 Yearly Expense 62000 62000 Accumulated Depreciation 62000 Book Value 310000 248000
Transcribed Image Text:On January 4, 2021, Brown Company paid $270,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $1,800, sales tax of $6,900, and $31,300 for a special platform on which to place the computer. Brown's management estimates that the computer will remain in service for five years and have a residual value of $35,000. The computer will process 30,000 documents the first year, with annual processing decreasing by 2,500 documents during each of the next four years (that is, 27,500 documents in 2022; 25,000 documents in 2023; and so on). For help with deciding which depreciation method to use, the company president has requested a depreciation schedule for each of the three depreciation methods. If rounding is necessary, use two decimal places for the depreciation amount per document. Read the requirements. Requirement 1. For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Complete the straight-line depreciation schedule. Begin by filling out the schedule through 2022, and then complete the schedule by entering the amounts through 2025. (Enter the rate to two decimal places.) Date January 4, 2021 December 31, 2021 December 31, 2022 Cost 310000 Straight-Line Depreciation Schedule Depreciable Cost Rate 0.20 0.20 Yearly Expense 62000 62000 Accumulated Depreciation 62000 Book Value 310000 248000
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