On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance met
hod of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. at the beginning of 2019, a decision was made to change to the straight-line method of depreciation for the machinery. the depreciation expense for 2019 would be
Cost on January 1 2016 = $1,250,000 Life = 10 years
Therefore, Double-declining depreciation rate = 2*(1,250,000/10)/1,250,000 = 2*0.1 = 2*10% = 20% Book value at end of 2016 = 1,250,000 - (1,250,000*20/100) = $1,000,000 Book value at end of 2017 = 1,000,000 - (1,000,000*20/100) = $800,000 Book value at end of 2018 = 800,000 - (800,000*20/100) = $640,000
Changing to straight line depreciation: Life remaining = 7 years Book value = $640,000
Depreciation expense per year = 640,000/7 = $91,428.57
Therefore, depreciation expense for 2019 = $91,428.57
the long-run framework directs one to avoid deficits; in the short-run framework deficits are useful if the economy is significantly below potential.
Explanation:
"Budget deficits should be avoided, even if the economy is below potential, because they reduce saving and lead to lower growth." This policy directive follow the long-run framework directs one to avoid deficits; in the short-run framework deficits are useful if the economy is significantly below potential.
<u>The reason is that in the short-run, deficits offer economic solutions by being an antidote to recessions, hence they could be a strategy of recession management in the short run</u>
<u>However in the long-run, deficits are not advisable as they could lead to debts because the major way to manage such deficits is by external borrowings. </u>
Percentage-of-receivables approach (balance sheet approach) states that the amount of doubtful accounts at the end of a reporting period can be calculated by applying a percentage of estimated uncollectible amounts to gross accounts receivable
