[The following information applies to the questions displayed below.] Tory Enterprises pays $248,400 for equipment that will last five years and have a $44,600 salvage value. By using the equipment in its operations for five years, the company expects to earn $89,500 annually, after deducting all expenses except depreciation. Calculate annual depreciation expense using double-declining-balance method. Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation is used. Complete this question by entering your answers in the tabs below. Depreciation Income Schedule Computation Calculate annual depreciation expenses using double-declining-balance method. Note: Round Annual Depreciation to the nearest whole dollar. Year Year 1 Year 2 Year 3. Year 4 Year 5 Total Depreciation for the Period Beginning of Period Book Value $ 248,400 149,040 Depreciation Annual Rate Depreciation 40% $ 99,360 40% 59,616 $ 158,976 Depreciation Schedule End of Period Accumulated Depreciation Book Value $ 149,040 89,424 Income Computation > < Prev 7 of 13 Next >

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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**Tory Enterprises Depreciation Analysis**

Tory Enterprises acquired equipment for $248,400, which is expected to last five years with a salvage value of $44,600. The company anticipates earning $89,500 annually over this period, excluding depreciation. The task is to calculate annual depreciation using the double-declining-balance method and outline income before depreciation, depreciation expense, and pretax income over five years.

**Depreciation Schedule**

This section includes a table showing the calculation of depreciation using the double-declining-balance method. The table outlines:

- **Year:** The time period (Year 1 to Year 5).
- **Beginning of Period Book Value:** Starting asset value before depreciation.
- **Depreciation Rate:** Constant rate used (40%).
- **Annual Depreciation:** Depreciation expense for the year.
- **Accumulated Depreciation:** Total depreciation to date.
- **Book Value:** Remaining value of the asset at the end of each year.

**Table Entries:**

1. **Year 1:**
   - Beginning Book Value: $248,400
   - Depreciation Rate: 40%
   - Annual Depreciation: $99,360
   - Accumulated Depreciation: $99,360
   - Book Value: $149,040

2. **Year 2:**
   - Beginning Book Value: $149,040
   - Depreciation Rate: 40%
   - Annual Depreciation: $59,616
   - Accumulated Depreciation: $158,976
   - Book Value: $89,424

*Years 3 to 5 are yet to be completed.*

**Conclusion:**

The total of $158,976 accumulated depreciation after Year 2 illustrates the amount deducted from the asset's original cost over two years. Continued calculations would apply the same principles for the remaining years. This method helps in understanding asset value reduction over its useful life, impacting financial statements and tax obligations.
Transcribed Image Text:**Tory Enterprises Depreciation Analysis** Tory Enterprises acquired equipment for $248,400, which is expected to last five years with a salvage value of $44,600. The company anticipates earning $89,500 annually over this period, excluding depreciation. The task is to calculate annual depreciation using the double-declining-balance method and outline income before depreciation, depreciation expense, and pretax income over five years. **Depreciation Schedule** This section includes a table showing the calculation of depreciation using the double-declining-balance method. The table outlines: - **Year:** The time period (Year 1 to Year 5). - **Beginning of Period Book Value:** Starting asset value before depreciation. - **Depreciation Rate:** Constant rate used (40%). - **Annual Depreciation:** Depreciation expense for the year. - **Accumulated Depreciation:** Total depreciation to date. - **Book Value:** Remaining value of the asset at the end of each year. **Table Entries:** 1. **Year 1:** - Beginning Book Value: $248,400 - Depreciation Rate: 40% - Annual Depreciation: $99,360 - Accumulated Depreciation: $99,360 - Book Value: $149,040 2. **Year 2:** - Beginning Book Value: $149,040 - Depreciation Rate: 40% - Annual Depreciation: $59,616 - Accumulated Depreciation: $158,976 - Book Value: $89,424 *Years 3 to 5 are yet to be completed.* **Conclusion:** The total of $158,976 accumulated depreciation after Year 2 illustrates the amount deducted from the asset's original cost over two years. Continued calculations would apply the same principles for the remaining years. This method helps in understanding asset value reduction over its useful life, impacting financial statements and tax obligations.
Expert Solution
Step 1: Meaning of depreciation :

Depreciation meaning:- Because of the usage, deterioration, or obsolescence, an asset's monetary value falls with time. Depreciation is basically used to measure this decline. Depreciation is the gradual lowering of a fixed asset's recorded cost over the time, until the asset's value is insignificant, according to accounting terminology. 

Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc.


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