FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise 11-2
Teal 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
$10,260
$17,100
$22,800
2
10,260
13,680
13,680
3
10,260
10,260
8,208
4
10,260
6,840
4,925
5
10,260
3,420
1,687
Total
$51,300
$51,300
$51,300
Answer the following questions.
What is the cost of the asset being
Cost of asset
$
Link to Text
What amount, if any, was used in the depreciation calculations for the salvage value for this asset?
Salvage value
$
Link to Text
Which method will produce the highest charge to income in Year 1?
The method that produces the highest charge to income in Year 1 is
Link to Text
Which method will produce the highest charge to income in Year 4?
The method that produces the highest charge to income in Year 4 is
Link to Text
Which method will produce the highest book value for the asset at the end of Year 3?
The method that produces the highest book value for the asset at the end of Year 3 is
Link to Text
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?
The method that will yield the highest gain (or lowest loss) on disposal of the asset if the asset is sold at the end of Year 3 is
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