Can you help me resolve this problem in financial accounting?any tip is welcome?

Roblez Corporation purchased machinery on January 1, 2010, at a cost of

$250,000. The estimated useful life of the machinery is 4 years, with an estimated resid-

ual value at the end of that period of $10,000. The company is considering different de-

preciation methods that could be used for financial reporting purposes.

Instructions

(a) Prepare separate depreciation schedules for the machinery using the straight-line

method, and the declining-balance method using double the straight-line rate. Round

to the nearest dollar.

(b) Which method would result in the higher reported 2010 income? In the highest to-

tal reported income over the 4-year period?

(c) Which method would result in the lower reported 2010 income? In the lowest total

reported income over the 4-year period?

1 Answer

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  • 1 decade ago
    Favorite Answer

    It has been a while since i have looked at depreciation but here is goes...and thanks for the refresher...

    Straight Line

    (250,000 - 10,000)/4 years = 60,000 depreciation per year

    Double Declining Balance (1/4 = 25% x 2 = 50%)

    Year 1 250,000 x .50 = 125,000

    Year 2 125,000 x .50 = 62,500

    Year 3 62,500 x .50 = 31,250

    Year 4 31,250 x .50 = 15,625

    b.) The item that will result in the higher reported 2010 income is the lower depreciation amount which would be straight line. For the for year period the lowest amount would be declining balance.

    c.) opposite of b.

    This is pretty basic stuff (rusty on the declining balance so you might want to crack the book to review).

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