Answer:
Net Income Calculation for 2021
Company A Company B Company C
Revenue $53,000 $53,000 $53,000
Less Depreciation Expense ($15,000) ($0.00) ($16,800)
Net Income / (Loss) $38,000 $53,000 $36,200
Explanation:
Company A
Depreciation Expense (Straight line) : (Cost - Salvage Value) / Number of Useful Life
2021 = ($62,000-$2,000) / 4
= $15,000
Company B
Depreciation Expense (Double Declining Balance) : 2 × SLDP × BVSLD
SLDP = 100/ 4
= 25%
2018 = 2 × 25% × $62,000
= $ 31,000
2019 = 2 × 25% × ($62,000 - $ 31,000)
= $ 15,500
2020 = 2 × 25% × ($62,000 - $ 31,000 - $ 15,500 )
= $ 7,750
2021 = 2 × 25% × ($62,000 - $ 31,000 - $ 15,500 - $ 7,750 )
= 0
In 2021 depreciation will only be allowed where:
Book Value = Salvage Value
<em>Test to see if Book Value has fallen below Salvage Value :</em>
Cost $62,000
Less Accumulated depreciation $54,250
Book Value $ 7,750
Company C
Depreciation Expense (units-of-production) : (Cost - Salvage Value) × Period`s Production / Total Expected Production
2021 = ($62,000-$2,000) × 70,000/ 250,000
= $16,800
Net Income Calculation for 2021
Company A Company B Company C
Revenue $53,000 $53,000 $53,000
Less Depreciation Expense ($15,000) ($0.00) ($16,800)
Net Income / (Loss) $38,000 $53,000 $36,200
