Rindy Inc. has a popular line of beaded jewellery. Rindy reported net earnings of $21,000 for 2014.
Question:
Rindy Inc. has a popular line of beaded jewellery. Rindy reported net earnings of $21,000 for 2014. Rindy depreciates furniture, fixtures, equipment and automotive assets on a straight-line basis over five years and assumes no residual value. Depreciation expense for the year totaled $1,000 and the assets are four years old.
What would net income be for 2014 if Rindy used the double-diminishing balance (DDB) instead? The company's income tax rate is 25%.
Step by Step Answer:
Net income under straightline depreciation 21000 Difference in ...View the full answer
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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