the following information applies to the questions displayed below.\ntory enterprises pays $248,400 for…

the following information applies to the questions displayed below.\ntory enterprises pays $248,400 for equipment that will last five years and have a $44,600 salvage value. by using the equipment in its operations for five years, the company expects to earn $89,500 annually, after deducting all expenses except depreciation.\ncalculate annual depreciation expense using double - declining - balance method.\nprepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five - year period, assuming double - declining - balance depreciation is used.\ncomplete this question by entering your answers in the tabs below.\ndepreciation schedule income computation\ncalculate annual depreciation expenses using double - declining - balance method.\nnote: round annual depreciation to the nearest whole dollar.\ndepreciation for the period end of period\nyear beginning of period book value depreciation rate annual depreciation accumulated depreciation book value\nyear 1 $ 248,400 40% $ 99,360 $ 99,360 $ 149,040\nyear 2 149,040 40% 59,616 89,424 89,424\nyear 3 89,424 40% 35,770 53,654\nyear 4 53,654 40% 9,054 44,600\nyear 5 44,600 40% 0 44,600\ntotal $ 203,800

the following information applies to the questions displayed below.\ntory enterprises pays $248,400 for equipment that will last five years and have a $44,600 salvage value. by using the equipment in its operations for five years, the company expects to earn $89,500 annually, after deducting all expenses except depreciation.\ncalculate annual depreciation expense using double - declining - balance method.\nprepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five - year period, assuming double - declining - balance depreciation is used.\ncomplete this question by entering your answers in the tabs below.\ndepreciation schedule income computation\ncalculate annual depreciation expenses using double - declining - balance method.\nnote: round annual depreciation to the nearest whole dollar.\ndepreciation for the period end of period\nyear beginning of period book value depreciation rate annual depreciation accumulated depreciation book value\nyear 1 $ 248,400 40% $ 99,360 $ 99,360 $ 149,040\nyear 2 149,040 40% 59,616 89,424 89,424\nyear 3 89,424 40% 35,770 53,654\nyear 4 53,654 40% 9,054 44,600\nyear 5 44,600 40% 0 44,600\ntotal $ 203,800

Answer

Explanation:

Step1: Calculate straight - line depreciation rate

The equipment has a useful life of 5 years. The straight - line depreciation rate $r_{sl}=\frac{1}{5}= 0.2$ or 20%. The double - declining - balance depreciation rate $r = 2\times r_{sl}=2\times0.2 = 0.4$ or 40%.

Step2: Calculate Year 1 depreciation

The beginning book value in Year 1 is $BV_0=$248,400$. The depreciation expense in Year 1, $Dep_1=r\times BV_0=0.4\times248400=$99,360$. The ending book value in Year 1, $BV_1 = BV_0 - Dep_1=248400 - 99360=$149,040$.

Step3: Calculate Year 2 depreciation

The beginning book value in Year 2 is $BV_1 = $149,040$. The depreciation expense in Year 2, $Dep_2=r\times BV_1=0.4\times149040=$59,616$. The ending book value in Year 2, $BV_2=BV_1 - Dep_2=149040 - 59616=$89,424$.

Step4: Calculate Year 3 depreciation

The beginning book value in Year 3 is $BV_2=$89,424$. The depreciation expense in Year 3, $Dep_3=r\times BV_2=0.4\times89424=$35,770$ (rounded to the nearest whole dollar). The ending book value in Year 3, $BV_3=BV_2 - Dep_3=89424 - 35770=$53,654$.

Step5: Calculate Year 4 depreciation

The beginning book value in Year 4 is $BV_3=$53,654$. The depreciation expense in Year 4, $Dep_4=r\times BV_3=0.4\times53654=$21,462$ (but we want to stop when we reach the salvage value). So we calculate the amount to bring the book value down to the salvage value. $Dep_4 = 53654 - 44600=$9,054$. The ending book value in Year 4 is the salvage value of $$44,600$. In Year 5, the depreciation is $0$ since the book value is already at the salvage value.

The total depreciation over the 5 - year period is $248400 - 44600=$203,800$.

Answer:

Year Beginning of Period Book Value Depreciation Rate Annual Depreciation Accumulated Depreciation End of Period Book Value
Year 1 $$248,400$ 40% $$99,360$ $$99,360$ $$149,040$
Year 2 $$149,040$ 40% $$59,616$ $$158,976$ $$89,424$
Year 3 $$89,424$ 40% $$35,770$ $$194,746$ $$53,654$
Year 4 $$53,654$ 40% $$9,054$ $$203,800$ $$44,600$
Year 5 $$44,600$ 40% $$0$ $$203,800$ $$44,600$
Total $$203,800$