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    Depreciation Calculation

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    I am reviewing the calculation of depreciation in preperation of my next class. I want to see if I am on track with my calculations and responses.

    K J Inc purchased equipment on January 1, 2005, at a cost of $100,000. The estimated useful life is 4 years with a salvage value of $10,000.

    Prepare two different depreciation schedules for the equipment:

    a. One using the double-declining balance method (round to the nearest dollar)
    b. One using the straight-line method (round to the nearest dollar)

    Determine which method would result in the greatest net income for the year ending December 31, 2005.

    How would taxes affect management's choice between these two methods for the financial statement?

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    Solution Preview

    The depreciation schedules are in the attached file. The double declining method has a higher depreciation in the initial years as compared to straight line method. ...

    Solution Summary

    The solution explains the straight line method and double declining balance method of calculating depreciation