Question 10 ABC purchased a new piece of equipment for $62,500. The estimated re

Question

Question 10 ABC purchased a new piece of equipment for $62,500. The estimated residual value is $2,500 and the estimated useful life is 3 years or 100,000 miles. If the company uses straight-line depreciation, which of the following statements is true with respect to Year 2? Depreciation Expense is $20,833 Book value is equal to $20,000 Accumulated Depreciation is equal to $40,000 Accumulated Depreciation is equal to $41,666 Question 11 ABC purchased a new piece of equipment for $62,500. The estimated residual value is $2,500 and the estimated useful life is 3 years or 100,000 miles. If the company uses double-declining balance, which of the following statements is true with respect to the end of Year 2? Depreciation Expense is equal to $18,333 Book Value is equal to $4,444 Accumulated Depreciation is equal to $55,556 Book Value is equal to $2,500 Question 12 1 pts Which of the following statements is FALSE regarding the various depreciation methods? Units of production method generates depreciation expense that most closely matches how much the asset was actually used during the year The amount of reported net income will not vary depending on which depreciation method is used. With all the depreciation methods, the ending book value is equal to salvage value Double declining balance generates more depreciation expense in the earlier years of the asset's life

Explanation / Answer

10 Depreciation expense=(62500-2500)/3=$20000 Accumulated depreciation = $20000+20000 = $40000 Book value=62500-40000 = $22500 Option 3 is correct Accumulated depreciation is $40000 11 Depreciation expense year 1=62500*66.6667%=$41667 Depreciation expense year 2=(62500-41667)*66.6667%=$13889 Accumulated depreciation = $41667+13889=$55556 Option 3 is correct Accumulated depreciation is $55556 12 The amount of net income will not vary depending on which depreciation method is used is FALSE

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