Answer:
Explanation:
Cost of equipment - $200,000
Residual value $ $10,000
Depreciable amount - ($200000-$10000) =190000
Straight line depreciation rate = 1/5*100 = 20%
Depreciation = 190000*20%=38,000
Double declining balance = 2*20%*200000 =80000
Income statement (straight Line ) Double declining
Gross profit $400,000 $400,000
Operating expense $180,000 $180,000
Depreciation $38,000 $80000
PBIT $182,000 $140,000
Tax (30%) $54600 $ 42000
Net profit $127400 $98,000
2)As depreciation is a non cash expenses , using different types of depreciation does not yield any cash savings.
It can only yield differences on the profit as seen in the income statement
