Test: Test 2 Chapters 4-7 in 244f 40 22. O 24 Falling Leaves Lawn Care This comp

Question

Test: Test 2 Chapters 4-7 in 244f 40 22. O 24 Falling Leaves Lawn Care This company purchased aew excavating equipment at the beginning of 2013 The equipment has a cost of $37,000, an estimated life of s years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2013. The equipment was used 20,00o hours during 2012 and 24,0oo hours during 2013. The number of expected hours over 5 years is 100,000. 26. O 27 C methods. Of these two 8 method creates the larger expense and larger tax savings in 2013 O c. Straight-ine depreciation creates both the larger expense and the larger tax sanng 31 C 32. O 33. O d. Double-dec 35. O 43/11/2010 ^ Type here to search F8 F12 F4 F5 F6

Explanation / Answer

Straight line depreciation = (37000-7000/5) = 6000 per year

Straight line rate = 100/5 = 20%

Double decling dep = 20*2=40%

2012 Depreciation = 37000*40% = 14800

2013 Depreciation = 37000*60*40% = 8880

so answer is a) Double declining balance depreciation creates both the large expense and the larger tax savings.

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