Accelerated Depreciation

Koffman's Warehouse purchased a forklift on January 1, 2017, for $530,000. The forklift is expected to last for five years and have a residual value of $14,000. Koffman's uses the double-declining-balance method for depreciation.

Required:

1. Calculate the depreciation expense, accumulated depreciation, and book value for each year of the forklift's life. If necessary, round any depreciation calculations to the nearest dollar.

Year	Annual Depreciation			Accumulated Depreciation			Book Value
2017	$fill in the blank 52dbde031f8c05c_1			$fill in the blank 52dbde031f8c05c_2			$fill in the blank 52dbde031f8c05c_3
2018	fill in the blank 52dbde031f8c05c_4			fill in the blank 52dbde031f8c05c_5			fill in the blank 52dbde031f8c05c_6
2019	fill in the blank 52dbde031f8c05c_7			fill in the blank 52dbde031f8c05c_8			fill in the blank 52dbde031f8c05c_9
2020	fill in the blank 52dbde031f8c05c_10			fill in the blank 52dbde031f8c05c_11			fill in the blank 52dbde031f8c05c_12
2021	fill in the blank 52dbde031f8c05c_13			fill in the blank 52dbde031f8c05c_14			fill in the blank 52dbde031f8c05c_15

Feedback

The double-declining-balance (DDB) method calculates depreciation at double the straight-line rate per period on the book value, which is a declining amount. Assets cannot be depreciated below residual value. Straight-line rate (SLR) = 100%/asset useful life. Book value = asset acquisition cost (amount recorded in account) less the accumulated depreciation. Set up T account for accumulated depreciation.

2. Identify and analyze the effect of the transaction for depreciation for 2017.

Activity	OperatingInvestingFinancingOperating
Accounts	Depreciation Expense Increase, Accumulated Depreciation IncreaseDepreciation Expense Increase, Accumulated Depreciation DecreaseDepreciation Expense Decrease, Accumulated Depreciation IncreaseDepreciation Expense Decrease, Accumulated Depreciation DecreaseDepreciation Expense Increase, Accumulated Depreciation Increase
Statement(s)	Balance SheetIncome StatementBalance Sheet and Income StatementBalance Sheet and Income Statement

Feedback

Record depreciation expense by increasing the expense and accumulated depreciation accounts.

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Accumulated DepreciationCashDepreciation ExpenseEquipmentEquipment ExpenseNo EntryAccumulated Depreciation

fill in the blank cfe5bb06501df8f_2

Accumulated DepreciationCashDepreciation ExpenseNotes PayableEquipment ExpenseNo EntryNo Entry

fill in the blank cfe5bb06501df8f_4

fill in the blank cfe5bb06501df8f_5

Accumulated DepreciationCashDepreciation ExpenseNotes PayableEquipment ExpenseNo EntryNo Entry

fill in the blank cfe5bb06501df8f_7

Accumulated DepreciationCashDepreciation ExpenseEquipmentEquipment ExpenseNo EntryDepreciation Expense

fill in the blank cfe5bb06501df8f_9

fill in the blank cfe5bb06501df8f_10

Feedback

Partially correct

3. Refer to Exhibit 8-2.

What factors may have influenced Koffmans to use the double-declining-balance method?

Koffman's may believe that the double-declining-balance method

best matches the decline in usefulness of the assetit is the easiest to calculatebest matches the decline in usefulness of the asset

with the revenues produced by the asset. Koffmans may also choose this method because it allows

lessmoremore

depreciation to be taken in the early years of the asset life and thus

acceleratesdelaysdelays

taxes until the later years.

Feedback

Consider the benefits of the DDB method. Consider how revenues are matched with the decline in usefulness of the asset. Consider the tax effects.

Feedback

Partially correct