Business Finance Homework Help

Consider the following:

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Requirement 1. For each depreciation method, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value for each year of the asset’s life. For the units of production method, round depreciation per unit to three decimal places.

Before completing the straight-line depreciation schedule, calculate the straight-line depreciation rate.

One
year	/	Useful life	=	(SL) Depreciation rate
1	/		=

Complete the Straight-Line Depreciation Schedule. Begin by filling out the schedule through 20192019,

and then complete the schedule by entering the amounts through

20222022.

Straight-Line Depreciation Schedule
		Depreciation	Depreciable	Depreciation	Accumulated	Asset
Date	Asset Cost	Rate	Cost	Expense	Depreciation	Book Value
January 2, 2018
December 31, 2018
December 31, 2019

December 31, 2020
December 31, 2021
December 31, 2022

Before completing the units of production (UOP) depreciation schedule, calculate the depreciation expense per unit. (Round depreciation per unit to three decimal places.)

Depreciable		Total unit
cost	/	output	=	Depreciation per unit

/

=

Complete the Units of Production Depreciation Schedule. Begin by filling out the schedule through 20192019,

and then complete the schedule by entering the amounts through

20222022.

(Enter depreciation per unit to three decimal places.)

Units of Production Depreciation Schedule
		Depreciation	Number of	Depreciation	Accumulated	Asset
Date	Asset Cost	Per Unit	Units	Expense	Depreciation	Book Value
January 2, 2018
December 31, 2018
December 31, 2019

December 31, 2020
December 31, 2021
December 31, 2022

Before completing the double-declining balance (DDB) schedule, calculate the double-declining balance rate.

SL Depreciation		DDB rate
rate	x	multiplier	=	DDB rate

x

=

Complete the Double-Declining Balance Depreciation Schedule. Begin by filling out the schedule through 20192019,

and then complete the schedule by entering the amounts through

20222022.

Double-Declining Balance (DDB) Depreciation Schedule
		DDB	Asset Book	Depreciation	Accumulated	Asset
Date	Asset Cost	Rate	Value	Expense	Depreciation	Book Value
January 2, 2018
December 31, 2018
December 31, 2019

December 31, 2020
December 31, 2021
December 31, 2022

Requirement 2. Amarillo EnterprisesAmarillo Enterprises,

Inc., prepares financial statements using the depreciation method that reports the highest income in the early years of asset use. For income tax purposes, the company uses the depreciation method that minimizes income taxes in the early years. Consider the first year

Amarillo EnterprisesAmarillo Enterprises,

Inc., uses the equipment. Identify the depreciation methods that meet

Amarillo EnterprisesAmarillo Enterprises‘

objectives, assuming the income tax authorities permit the use of any method.

The depreciation method that maximizes reported net income in the first year of the computer’s life is the ▼

double-declining balance

straight-line

units of production

method,

which produces the

▼

highest

lowest

depreciation for that year. The method that minimizes income taxes in the first year is the

▼

double-declining balance

straight-line

units of production

method, which produces the

▼

highest

lowest

depreciation amount for that year.

Requirement 3. Show how Amarillo EnterprisesAmarillo Enterprises,

Inc., would report equipment on the December 31,

20182018,

balance sheet for each depreciation method.

December 31, 2018:	SL	UOP	DDB

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