### Depreciation Methods and Schedules#### Requirements1. **Depreciation Schedules:** Prepare a schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value for each year of the asset’s life. Round depreciation per unit to three decimal places for units of production. Before computing straight-line depreciation, calculate the rate.2. **Maximizing First-Year Depreciation:** Bailey Enterprises Inc. plans to report the highest possible depreciation for the first year. Consider all methods: straight-line, units of production, and double-declining balance.3. **Balance Sheet Reporting:** Show equipment on the December 31, 2018, balance sheet for each method.#### Straight-Line Depreciation- **Calculation:** Complete the schedule through 2019, then enter subsequent amounts until 2022.- **Table:** Fill out asset cost, depreciation rate, depreciation expense, accumulated depreciation, and book value.#### Units of Production Depreciation- **Formula:** \[ \text{Depreciation Cost} = \frac{\text{Cost - Residual Value}}{\text{Total Units of Output}} \times \text{Output} \]- **Table:** Fill out asset cost, depreciation per unit, units, expense, accumulated depreciation, and book value through 2022.#### More Info- **Initial Asset Purchase:** Bailey Enterprises Inc. bought $205,600 worth of equipment on January 4, 2018. The purchase includes $8,900 freight charges and $4,500 for a building foundation. Residual value $6,000, estimated output 18,000 units for 5 years. Production: 3,300 units (2018), 4,400 (2019), 4,000 (2020), 3,200 (2021), 3,100 (2022).### Visual Elements- **Tables:** Spreadsheets for Straight-Line and Units of Production depreciation are included, with columns for different depreciation metrics. This guide assists in understanding different depreciation methods and their impact on financial reporting. ### Educational Content on Double-Declining Balance (DDB) Depreciation#### Before Completing the Double-Declining Balance Schedule1. **Calculate the Double-Declining Balance Rate:** - Use the formula: - **SL Depreciation Rate** - **DDB Rate = Rate × Multiplier** - Multiplier for DDB is typically 2.#### Schedule CompletionTo complete the **Double-Declining Balance Depreciation Schedule,** begin by filling out the schedule for 2019 and then continue by entering amounts through 2022.##### Double-Declining Balance (DDB) Depreciation Schedule| Date | Asset Cost | DDB Rate | Asset Book Value | Depreciation Expense | Accumulated Depreciation | Asset Book Value ||----------------------|------------|----------|------------------|----------------------|--------------------------|------------------|| January 4, 2018 | | | | | | || December 31, 2018 | | | | | | || December 31, 2019 | | | | | | || December 31, 2020 | | | | | | || December 31, 2021 | | | | | | || December 31, 2022 | | | | | | |#### Requirements2. **Financial Statement Preparation:** - Bailey Enterprises, Inc. prepares financial statements using depreciation methods that yield the highest income in early asset life years. - For tax purposes, methods minimizing income taxes in early years are used. - In the first year, determine the optimal depreciation method for highest reported income and minimal taxes: - **Maximizing Income:** Select the depreciation method that results in the highest income. - **Minimizing Taxes:** Select the method resulting in the lowest tax liability.3. **Equipment Reporting Method Comparison:** - Show depreciation calculations as Bailey Enterprises, Inc. would report on an equipment balance sheet for December 31, 2018, using each method: | December 31, 2018 | SL (Straight Line) | UOP (Units of Production) | DDB (Double Declining Balance)

The depreciation expense is charged on fixed assets as reduction in the value of fixed assets with…

A heincome More Info Requirements On January 4. 2018. Baley Enterprises. Inc. paid S205.600 for equipment used in manulacturing automotive supplies in addion to the basic purchase price. the company paid S1.000 for transpotation charges. S100 for insurance for the 1. For each depreciation method prepare a depreciation schedule shoving asset cost, depreciation epense accumlated depreciaton, and asset book value for each year of the assets e For the units of production method round depreciation per unit to three decimal places 2. Baley Enterprises ne prepares nancalatements using he depreciation method that reports the highest Income in the early years of asset use For income tax purposes he company uses the depreciation method whannual production decreasing by 10.000 units during each of the net four years e. 50.000 unts in year 240 000 units in year 3 and se on fora total of 200.000 units) inying to decide which depreciation method to use Baley Enterpises inc, reguested a depreciation schedule for each of the tree depreciation methods (traight ine, unts of producdtion, and double decining 1. Show how Baley Enterpisen, Inc, would repot eguipment on the December 31, 2010, balance sheet for each depreciation method balance) Print Done Print Done Enter deprediation per unit to thvee decimal places)

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q