Oriole Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years'-digits method, and (3) the double-declining-balance method. Year   Straight-Line   Sum-of-the- Years'-Digits   Double-Declining- Balance 1     $12,600       $21,000       $28,000   2     12,600       16,800       16,800   3     12,600       12,600       10,080   4     12,600       8,400       6,048   5     12,600       4,200       2,072   Total     $63,000       $63,000       $63,000   What is the cost of the asset being depreciated? Cost of asset What amount, if any, was used in the depreciation calculations for the salvage value for this asset? Salvage value Which method will produce the highest charge to income in Year 1? Which method will produce the highest charge to income in Year 4? Which method will produce the highest book value for the asset at the end of Year 3? If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Topic Video
Question
100%

Oriole Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years'-digits method, and (3) the double-declining-balance method.

Year
 
Straight-Line
 
Sum-of-the-
Years'-Digits
 
Double-Declining-
Balance
1
    $12,600       $21,000       $28,000  
2
    12,600       16,800       16,800  
3
    12,600       12,600       10,080  
4
    12,600       8,400       6,048  
5
    12,600       4,200       2,072  
Total
    $63,000       $63,000       $63,000

 

What is the cost of the asset being depreciated?

Cost of asset

What amount, if any, was used in the depreciation calculations for the salvage value for this asset?

Salvage value

Which method will produce the highest charge to income in Year 1?

Which method will produce the highest charge to income in Year 4?
Which method will produce the highest book value for the asset at the end of Year 3?
If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 2 images

Blurred answer
Knowledge Booster
Depreciation Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education