This company purchased new excavating equipment at the beginning of 2021. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2021. The equipment was used for 20,000 hours during 2021 and 24,000 hours during 2022. The number of expected hours over 5 years is 100,000. The company is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and which method creates the larger tax savings in 2021? a. Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. b. Double-declining-balance depreciation creates both the larger expense and the larger tax savings. c. Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings. d. Straight-line depreciation creates both the larger expense and the larger tax savings.
This company purchased new excavating equipment at the beginning of 2021. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2021. The equipment was used for 20,000 hours during 2021 and 24,000 hours during 2022. The number of expected hours over 5 years is 100,000. The company is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and which method creates the larger tax savings in 2021? a. Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings. b. Double-declining-balance depreciation creates both the larger expense and the larger tax savings. c. Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings. d. Straight-line depreciation creates both the larger expense and the larger tax savings.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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This company purchased new excavating equipment at the beginning of 2021. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's
The company is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and which method creates the larger tax savings in 2021?
a. Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.
b. Double-declining-balance depreciation creates both the larger expense and the larger tax savings.
c. Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.
d. Straight-line depreciation creates both the larger expense and the larger tax savings.
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