
Concept explainers
Introduction: The value of an asset decreases over a period of time due to wear and tear. This reduction in the value of asset is termed as depreciation.
Given: Depreciation schedules as per 3 different methods are provided below:
Year |
Straight-Line |
Sum-of-the-Years’-Digits |
Double-Declining-Balance |
1 |
$9,000 |
$15,000 |
$20,000 |
2 |
$9,000 |
$12,000 |
$12,000 |
3 |
$9,000 |
$9,000 |
$7,200 |
4 |
$9,000 |
$6,000 |
$4,320 |
5 |
$9,000 |
$3,000 |
$1,480 |
Total |
$45,000 |
$45,000 |
$45,000 |
(a)
To determine the cost of the asset that has been
(b)
To determine the amount of salvage value, if any, used in the depreciation calculations for this asset.
(c)
To determine which method will result in highest charge to the net income in the first year?
(d)
To determine the method which will produce highest charge to the income in the fourth year?
(e)
To determine which method will produce the highest book value for the asset at the end of Year 3?
(f)
To determine if the asset is sold at the end of the third year, which depreciation method will yield the highest gain (or lowest loss) on the disposal of the asset?

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Chapter 11 Solutions
Study Guide Intermediate Accounting, Volume 1: Chapters 1 - 14
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