Depreciation and Rate of Return Burrell Company purchased a machine for $33,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $16,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 25 2017 32.14 % 2018 45 2019 75 2020 225 Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 2017 2018 2019 2020 %

Depreciation and Rate of Return Burrell Company purchased a machine for $33,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $16,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 25 2017 32.14 % 2018 45 2019 75 2020 225 Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places. 2016 2017 2018 2019 2020 %

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 2E: Depreciation Methods Sorter Company purchased equipment for 200,000 on January 2, 2019. The...

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On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
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