Question

An item of equipment acquired on January 1 at a cost of $50,000 has an estimated life of five years and an estimated salvage of $10,000.

Required
a. From a management perspective, from among the straight-line method, declining-balance method, and sum-of-the-years’-digits method of depreciation, which method should be chosen for the financial statements if income is to be at a maximum the first year? Which method should be chosen for the income tax returns, assuming that the tax rate stays the same each year? Explain and show computations.
b. Is it permissible to use different depreciation methods in financial statements than those used in tax returns?



$1.99
Sales1
Views299
Comments0
  • CreatedJune 22, 2012
  • Files Included
Post your question
5000