Question
Benick Industries purchased a new lathe on January 1, 2020, for $300,000. Benick estimates that the lathe will have a useful life of four years
Benick Industries purchased a new lathe on January 1, 2020, for $300,000. Benick estimates that the lathe will have a useful life of four years and that the company will be able to sell it at the end of the fourth year for $60,000.
- Compute the depreciation expense that Benick Industries would record for 2020, 2021, 2022, and 2023 under each of the following methods:
- Straight-line depreciation
- Double-declining-balance depreciation
- If you were the president of Benick Industries, what might you consider when choosing a depreciation method for financial reporting purposes? Why?
Required:
After completing Exercise 9-8 provide the following answers:
What amount would be the yearly Straight-line depreciation expense for the lathe?
What amount would be the depreciation expense for the lathe in 2020 using the Double-declining-balance method of depreciation?
What amount would be the depreciation expense for the lathe in 2021 using the Double-declining-balance method of depreciation?
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