Tabesh Corporation purchased machinery on January 1, 2007, at acost of $210,000.

Question

Tabesh Corporation purchased machinery on January 1, 2007, at acost of $210,000. The estimated useful life of the machinery is 4years, with an estimated residual value at the end of that periodof $10,000. The company is considering different depreciationmethods that could be used for financial reporting purposes.

Prepare separate depreciation schedules for the machinery usingthe straight-line method, and the declining-balance method usingdouble the straight-line rate. Fill in the following amounts foreach method.

Straight-line

2007 Accumulated depreciation $ Book value $
2008 Accumulated depreciation $ Book value $
2009 Accumulated depreciation $ Book value $
2010 Accumulated depreciation $ Book value $

Double-declining balance

2007 Accumulated depreciation $ Book value $
2008 Accumulated depreciation $ Book value $
2009 Accumulated depreciation $ Book value $
2010 Accumulated depreciation $ Book value $

Use the following code to answer the next questions.

Straight-line
Double-declining balance
Both

Which method would result in the higher reported 2007 income?BothDouble-declining balanceStraight-line

In the highest total reported income over the 4-year period?Straight-lineBothDouble-declining balance

Which method would result in the lower reported 2007 income?Straight-lineBothDouble-declining balance

In the lowest total reported income over the 4-year period?BothDouble-declining balanceStraight-line

Explanation / Answer

Straight -Line method         210,000 -10,000                  4 = $ 50,000 /yr Yr                    Accumulateddepreciation                         Book value 2007                         50,000                                                160,000 2008                       100,000                                                 110,000 2009       150,000             60,000 2010    200,000          10,000 Double -Declining Balance method 100 %   = 25% 4 yrs Double declining 25% * 2 = 50 % Yr               AnnualDepreciation              AccumulatedDepreciation                 Book value 2007                105,000                                     105,000                                           105,000 2008                 52,500                                      157,500                                             52,500 2009                 26,250       183,750          26,250 2010      13125       196875          13,125 use the following code to answer the next questions 1. Higher reported 2007 income - straight linemethod. 2. Double - declining balance 3. Double declining method 4.Double decling balance method.

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