On January 3, 2002, J.B. weld co. Paid $224,000 for a computer system. In addition to the
Question:
On January 3, 2002, J.B. weld co. Paid $224,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $6,200, $6,700 sales tax, and $3,100 for a special platform on which to place the computer. J.b. Weld management estimates that the computer will remain in service 5 years and have a residual value of $20,000. The computer will process 50,000 documents the first year, with annual processing decreasing by 5,000 documents during each of the next 4 years (that is, 45,000 documents in 2003, 40,000 documents in 2004; and so on). In trying to decide which depreciation method to use, the company president has requested a depreciation schedule for each of the 3 depreciation methods (straight line, units of production and double declining balance).
A) For each of the generally accepted depreciation methods, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation and asset book value.
B) J.B. Weld reports to stockholders and creditors in the financial statements using the depreciation method that maximizes reported income in the early years of asset use. Which depreciation method would J.B. Weld use to accomplish this goal? Explain
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick