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Depreciation and Rate of Return Burrell Company purchased a machine for $38,000 on January 2, 2016. The machine has an estimated service life of 5
Depreciation and Rate of Return
Burrell Company purchased a machine for $38,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $19,000 each year. The tax rate is 20%.
Required:
Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset.
- Straight-line method and Double-declining-balance depreciation method: Do not round intermediate calculations. Round final answers to two decimal places.
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