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Financial Management

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Balls and Bats, 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.

For this assignment you are to complete the following tasks:

Prepare two different depreciation schedules for the equipment - one using the double-declining balance method, and the other 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 statements?

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The response addresses the queries posted in 437 words with references.

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The response addresses the queries posted in 437 words with references.

//First of all, we will make the depreciation schedule by using both the depreciation methods i.e. double declining balance method and straight line method. After making the depreciation schedule; we will discuss the impact of both methods on net income and taxes of the organization.

Depreciation Schedule Using Double Declining Balance Method - To make the depreciation schedule for double declining balance method; first, the straight depreciation rate will be calculated. The straight line depreciation rate is 25% (100% / 4 years). To calculate depreciation from double declining balance method, the depreciation rate will be double the straight line depreciation rate i.e. 50% (Eisen, 2003). The ...

Solution provided by:
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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