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Lunna [17]
3 years ago
6

On January 1, Year 1, the Starshina Company paid $25,000 for a photocopier with an estimated useful life of 4 years, and an esti

mated residual value of $5,000. The company uses the double-declining-balance method. What is the amount of depreciation expense for Year 3?
Business
1 answer:
maksim [4K]3 years ago
7 0

Answer: The amount of depreciation expense for Year 3 is $3,125.

Explanation: The double-declining method is otherwise known as the reducing balance method and is given by the formula below:

Double declining method = 2 X SLDP X BV

SLDP = straight-line depreciation percentage

BV = Book value

Under straight-line method, depreciation expense is (cost - residual value) / No of years = ($25,000 - $5,000) / 4 years = $5,000 yearly depreciation expense.

Under the double-declining method, 100%/4years = 25%, then 25% multiplied by 2 to give 50%

At Year 1, 50% X $25,000 = $12,500

At Year 2, 50% X $12,500 ($25,000 - $12,500) = $6,250

At Year 3, 50% X $6,250 ($12,500 - $6,250) = $3,125 (the depreciation expense would stop at this stage since the amount falls below the residual value).

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inn [45]

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Explanation:

Perpetuity is the cash flows to be receivable for an unspecified period of time. The present value of a perpetuity is calculated as the cash flows divided by the interest rate provided.  

Given data;

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3 years ago
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The question does not provide information on the hypothetical economic expectations of the two economies, but as a risk-averse investor, it's a better idea to try to "spread" the risk instead of concentrating it.

In the first economy, conditions might or might not be good. If they are good, returns will be extraordinary because all stocks will provide good returns, but if conditions take a turn for the worse, all stocks prices will fall and the financial consequences will be catastrophic.

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4 0
2 years ago
Presented below are long-term liability items for Pharoah Company at December 31, 2020. Bonds payable, due 2022 $625,000 Lease l
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See explanation

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