Purchase Solution

Depreciation -straight-line versus double declining-balance

Not what you're looking for?

Ask Custom Question

Same Day Laundry Services purchased a new steam press January 1, for $35,000. It is expected to have a five-year useful life and a $3,000 salvage value. Same Day expects to use the steam more extensively in the early years of its life.

Required

a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation.

b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation.

c. Would the choice of one depreciation method over another produce a different amount of cash flow for any year? Why or why not?

d. Assume that Same Day Laundry Services sold the steam press at the end of the third year for $20,000. Compute the amount of gain or loss using each depreciation method.

Purchase this Solution

Solution Summary

Calculates depreciation expenses using straight-line and double declining-balance depreciation methods.

Solution Preview

Please see attached file
Effects of straight-line versus double declining-balance depreciation
Same Day Laundry Services purchased a new steam press January 1, for $35,000.  It is expected to have a five-year useful life and a $3,000 salvage value.  Same Day expects to use the steam more extensively in the early years of its life.

Required

a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation.

Cost= $35,000
Salvage Value= $3,000
Life= 5 years
Annual depreciation= (Cost - Salvage Value) / Life= $6,400 =($35,000 - $3,000) / 5

Year Depreciation expense using Straight Line depreciation Book Value at the end of the year
1 $6,400 ...

Purchase this Solution


Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations