On 1/1/2020 you have purchased an asset with for $50,000. You estimate the useful life to be 5 years and the salvage value to be $10,000.

A) Using straight line depreciation, fill in the estimated depreciation schedule below.

B) Now using accelerated depreciation (1.5X declining balance), fill in the estimated depreciation schedule below.

C) On 12/31/2020 which method will report more net income, and by how much? Assume the tax rate is 40%.

D) Assume that on 1/1/2021, you choose to sell the asset. You receive 40,000 in cash. Report the gain or loss under each depreciation method. (Circle one and Fill in the blank)

Straight Line Depreciation: GAIN or LOSS

Amount:

1.5X Accelerated Depreciation: GAIN or LOSS

Amount: