Reference no: EM131752174
Question: The ABC Company, located in Boston, purchases a piece of equipment from a dealer in Chicago for $700,000. The cost of shipping the equipment, $50,000, will be paid for by ABC Co. It is estimated that the asset will last four years and at the end of its useful life will have a salvage value of $30,000. When the equipment arrives it has to be set up and adjusted, at a cost of $40,000.
1. Assume the company uses straight-line depreciation. The depreciation expense for year one and year two would be
a) 190,000; 190,000
b) 190,000; 95,000
c) 95,000; 190,000
d) 136,667; 136,667
2. Assume the company uses double declining balance (DDB) depreciation. The depreciation expense for years one and year two would be
a) 304,000; 228,000
b) 316,000; 237,000
c) 300,000; 200,000
d) 395,000; 197,500
3. Assume the company uses sum-of-the-years'-digits (SYD) depreciation. The depreciation expense for year one and year two would be
a) 316,000; 237,000
b) 304,000; 228,000
c) 300,000; 200,000
d) 76,000; 152,000
4. This part is independent of parts one through three. Assume that a company purchased an asset for $700,000. This asset has an estimated salvage value of $50,000. At the end of three years the balance in the accumulated depreciation account is $80,000, when the asset is sold for $610,000.
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