Answer:
Its earnings per share will decrease.
Its return on equity will go down.
Its equity multiplier will go down.
Explanation:
Since net income remains the same, earnings per share will decrease. This happens because there will be more stocks outstanding (the denominator in the EPS formula), so the result will be lower.
Return on equity will also decrease, since net income will remain the same while equity increases (same logic as EPS).
Unless this company is 100% financed through equity, it will have some debt (liabilities). The equity multiplier = total assets / total equity. E.g. total assets increase from $20 to $22 million, and total equity increases from $30 to $32 million.
Original equity multiplier = $40 / $30 = 1.333
Equity multiplier after issuing more stocks = $42 / $32 = 1.3125
C. Its equity multiplier will go down.
D. Its current ratio will go down.
E. Its quick ratio will go down.
Bill’s Bakery is trying to decide if it should use all of its resources to make 12 dozen chocolate chip cookies or 10 dozen peanut butter kiss cookies. What is the trade off that Bill will make?
Answer:
The trade off Bill's Bakery will make will be using most of its resources in producing the product that would be more attractive to the customers while producing lesser of the less attractive product
Explanation:
The trade off that Bill will make will be using most of its resources in producing the product that would be more attractive to the customers while producing lesser of the less attractive product. this will be dependent on which product will be more beneficial to Bill's Bakery financial i.e based on customers depend .
A Trade off is a business exchange where by one benefit is given up for another because both cannot be compatible at a time
Dake Corporation's relevant range of activity is 5,200 units to 6,000 units. When it produces and sells 5,600 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.55 Direct labor $ 3.80 Variable manufacturing overhead $ 2.15 Fixed manufacturing overhead $ 3.50 Fixed selling expense $ 1.05 Fixed administrative expense $ 0.75 Sales commissions $ 0.85 Variable administrative expense $ 0.75 If 5,400 units are produced, the total amount of direct manufacturing cost incurred is closest to:
Answer:
Total direct manufacturing cost= $55,890
Explanation:
Giving the following information:
5,600 units:
Average Cost per Unit Direct materials $ 6.55
Direct labor $ 3.80
The manufacturing overhead is an indirect cost. It is allocated based on a predetermined rate. We will take into account only the direct materials and direct labor.
For 5,400 units:
Total direct manufacturing cost= 5,400*(6.55 + 3.8)
Total direct manufacturing cost= $55,890
Diseconomies of scale arise primarily because: of the difficulties involved in managing and coordinating a large business enterprise. the short-run average total cost curve rises when marginal product is increasing. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital). firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available.
Answer: of the difficulties involved in managing and coordinating a large business enterprise
Explanation:
Diseconomies of scale is when there's an increases in average total cost used during the production of a product due to the expansion in size of the firm in the longrun.
The main factor that can be attributed to diseconomies of scale is when there's difficulty in the effective and efficient control and coordination of the operations of a firm due to its growth.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise. Option (b) is correct.
Diseconomies of scale can happen for a number of reasons, but the inability to effectively manage an expanding staff is a common culprit. A company's internal overcrowding impact is frequently the main factor contributing to scale-related inequities.
Economies of scale result in reduced production costs and higher production while diseconomies of scale result in higher production costs.
Therefore, Option (b) is correct.
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The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. formulating theories about economic events. b. performing an experiment in an economic system. c. applying mathematical methods to economic analysis. d. analyzing available data.
Answer:
b. performing an experiment in an economic system.
Explanation:
In contrast to scientific experimentation, whereby connections and differences can be measured between two or more variables. In economics, theory and observation are more difficult than in sciences such as physics due to the difficulty in performing an experiment in an economic system, as human beings' opinions change over time, due to dynamism in human society.
Hence, in this case, the correct answer is option
AIDA represents attention, interest, desire and
A. Action.
B. Assessment.
C. Attitude.
D. Accountability.
A sweatshop is an example of an ethical mode of production.
Answer:
Algunas de las empresas maquiladoras en México son General Motors, General Electric, Ford Motors, Sony, HP, Hyundai, entre otros. Los productos que elaboran las maquiladoras son de gran variedad, tales como: . - Productos alimenticios.11 abr. 2016
Explanation:
Answer:
False
Explanation:
Opportunity Cost is the measurement
of sacrifice. Opportunity Cost exists
because of what?
A. the production of two goods in an economy
B. the PPF Model of economics
C. the scarcity of resources available in an economy
Answer:
C. the scarcity of resources available in an economy
Explanation:
Opportunity cost is the cost of the option foregone when one alternative is choose over other alternatives.
It is usually assumed that humans wants are limitless and the resources available to satisfy these needs are limited. So, as more quantity of a good is being produced, there would be less resources available to produce another good.
It is due to opportunity costs that the PPF curve is bowed outward because as more of one good is being produced, less of the other good would be produced
Answer: C. the scarcity of resources available in an economy
Explanation:
Opportunity Cost is indeed a measurement of sacrifice as it is the cost of the next best alternative foregone in other to be able to make the current decision.
The reason Opportunity costs exist is because of a scarcity of resources. This means that we have to manage our resources by applying them to one alternative at a time so that they do not finish. Had resources been infinite, all alternatives could be embarked on.
A basic ARM is made for $120,000 at an initial interest rate of 3 percent for 30 years with an annual reset date. The borrower believes that the interest at the beginning of year 2 will increase to 4 percent (i.e., the interest rate will reset). Assume no negative amortization. Given that the interest rate will increase to 4 percent as predicted, what will be the balance at the end of year 2 or the beginning of year 3
Answer:
$115,302.71
Explanation:
During the first year, the monthly payments were $505.92, and at the end of the year, the principal's balance was $117,494.70.
Then the interest rate increases to 4%, and your monthly payment also increases to $570.72. At the end of year 2, the principal's balance is $115,305.96 (see amortization schedule).
you can determine the monthly payment by using an annuity formula:
original monthly payment = $120,000 / 237.18938 (PV annuity factor, 0.25%, 360 periods) = $505.9248437 ≈ $505.92
adjusted monthly payment (second year) = $117,494.70 / 205.86942 (PV annuity factor, 0.3333%, 348 periods) = $570.7243941 ≈ $570.72
The government spends $45 million on heart disease research and gains in reducing death from heart disease are significant. If the law of diminishing returns holds, what would additional increases in expenditure on heart disease research likely do to reduce death from heart disease
Answer:
They would cause relatively smaller reductions in death from heart disease.
Explanation:
Since in the question it is mentioned that the government incurred $45 million for research on the heart disease and gain that decreased the death occured from the heart disease. Now if the law of diminishing retuns hold, so the extra rise in expenditure on heart disease result in relatively small decline as it decreases the returns
Therefore the same is to be considered
An environmental analysis can accurately foretell the future.
a) true
b) false
The following items and amounts were taken from Familia Inc.’s 2022 income statement and balance sheet, the end of its first year of operations. Interest expense $ 2,200 Equipment, net $ 54,700 Interest payable 700 Depreciation expense 3,200 Notes payable 11,800 Supplies 4,100 Sales revenue 44,300 Common stock 26,800 Cash 2,900 Retained earnings ? Salaries and wages expense 15,600 Supplies expense 900
Question is:
(a) In each case, identify whether the item is an asset, liability, stockholders' equity, revenue, or expense item as attached as picture
Answer
Items Identification
Interest expense Expense
Interest payable Liability
Notes payable Liability
Sales revenue Revenue
Cash Asset
Salaries and Expense
wages expense
Equipment, net Asset
Depreciation expense Expense
Supplies Asset
Common stock Stockholder's equity
Retained earnings Stockholder's equity
Supplies expense Expense
The purchasing function's main concern is with:________
Answer:
Sourcing of Suppliers
Explanation:
Purchasing Function of the Business deals with the requisitions of materials and supplies to supply the internal demands or order of the business.
This function entails finding the right supplier offering quality materials at affordable prices.
Which statement about the purpose of PESTEL is correct? A. It helps managers understand how a firm's external environment affects the firm. B. It helps managers understand how a firm's internal strength may help it take advantage of an external opportunity C. It helps managers understand the relationship between the firm's industry and its buyers and suppliers D. It helps managers understand the firm's internal environment, such as its employees' union.
Answer:
A. It helps managers understand how a firm's external environment affects the firm.
Explanation:
PESTEL is an acronym that stands for Political, Economic, Socio-cultural, and technological. It analyses the environment in which a business operates.
In marketing it has found an application in forecasting market decline and growth, market direction, and potential.
The analysis is an external one that identifies strengths and weaknesses in macro-environmental factors. This knowledge can now be used in SWOT analysis by the business.
Springer Company had the following transactions in August: Earned $3,600 of revenues on account; collected $5,300 from a customer for services provided last month; incurred $840 of repair expense and paid cash; paid $200 for rent that it owed from the previous month. What is the net income in August?
Answer:
Net income in August = $2,760
Explanation:
This is an example of matching concept in accounting which states revenue must recorded in the period in which it is earned whether or not cash is received, and cost must recorded in the period in which it is incurred whether or that cash is paid.
The net income in August can be calculated by considering only income earned in August and expenses incurred in August whether or not cash exchanges hands. Therefore, net income in August can be calculated as follows:
Net income in August = Revenue earned on account - Repair expense incurred and paid in cash = $3,600 - $840 = $2,760
Therefore, the net income in August is $2,760.
Note: Both $5,300 collected from a customer for services provided last month and $200 paid for rent that it owed from the previous month are not considered in the calculation because they only shows that cash exchanged but they are not part of the revenue and expenses for August.
In identifying an industry's key success factors, strategists should Select one: A. consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak. B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage. C. focus their attention on what it will take to capitalize on the impacts of the industry's driving forces. D. try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly. E. consider what it will take to overtake the company with the industry's overall best strategy.
Answer:
B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage
Explanation:
In any industry there is always competition between firms to attract and retain customers. They must come up with strategic ways by which competitive edge is maintained.
This will translate to higher profits compared to other firms.
As a strategist the key success factors in the industry must be identified to aid in planning.
These success factors include: what makes customers choose between brands, capabilities that ensure a firm's success, and factors that can put a business at a competitive disadvantage.
(3) A total of 1000 units of a certain product must be completed by the end of the current week. It is now late Monday afternoon, so only four days (8-hour shifts) are left. The standard time for producing each unit of the product (all manual operations) is 11.65 min. How many workers will be required to complete this production order if it is assumed that worker efficiency will be 115%
Answer:
6 workers
Explanation:
Calculation for How many workers will be required to complete this production order
First step is to find the Workload WL
Workload WL= 1,000(11.65)/1.15
Workload WL=11,650/1.15
Workload WL = 10,130.4 min
Workload WL converted from minutes to hour= 168.84 hr
Second step is to find the Available time
Available Time= 4(8.0)
Available Time= 32 hr/worker
Last step is to find How many workers will be required to complete this production order
Workers= 168.84/32
Workers = 5.28 Approximately 6 workers
Therefore 6 workers will be required to complete this production order.
g If you could reinvest the cash flow stream of $798, $508, $509, $967, $503, $1,362, $1,015, and $1,387 at 8.6% interest, how much will you have from this investment in 8 years? (In other words, what is the future value of this stream of cash flows?) Note that the cash flows are not necessarily the same as the previous problem's cash flows. The cash flow stream starts in one year; so, the last cash flow is 8 years from now. Round to the nearest cent.
Answer:
$4,707.92
Explanation:
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow in year 1 = $798
Cash flow in year 2 = $508
Cash flow in year 3 = $509
Cash flow in year 4 = $967
Cash flow in year 5= $503
Cash flow in year 6 = $1,362
Cash flow in year 7 = $1,015
Cash flow in year 8 = $1,387
I = 8.6%
Present value = $4,707.92
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.60, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year.
Question Completion:
Company A makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes predetermined overhead rates on a quarterly basis, using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:
Quarters
First Second Third Fourth
Direct materials $240,000 $120,000 $60,000 $180,000
Direct labor 96,000 48,000 24,000 72,000
Manufacturing overhead 228,000 204,000 192,000 ?
Total manufacturing costs $564,000 $372,000 $276,000 ?
Number of units produced 80,000 40,000 20,000 60,000
Estimated unit product cost $7.05 $9.30 $13.80 ?
Answer:
Company A
1. Total fixed manufacturing overhead cost per quarter:
Quarters
First Second Third Fourth
Fixed manufacturing o/h $180,000 $180,000 $180,000 $180,000
2. Estimated unit product cost for the fourth quarter:
= Total manufacturing costs divided by estimated units produced
= $468,000/60,000 = $7/80
3. The fluctuation in the estimated unit product cost is caused by the fixed manufacturing overhead vis-a-vis the units produced. When more units are produced, the fixed manufacturing overhead per unit is less than when less units are produced.
4. Calculation of the unit product cost for all units produced during the year = total manufacturing costs divided by total units produced
= $1,680,000/200,000
= $8.40
Explanation:
Data and Calculations:
a) Estimated variable cost = $0.60
Quarters
First Second Third Fourth
Direct materials $240,000 $120,000 $60,000 $180,000
Direct labor 96,000 48,000 24,000 72,000
Manufacturing overhead 228,000 204,000 192,000 216,000
Total manufacturing costs $564,000 $372,000 $276,000 $468,000
Number of units produced 80,000 40,000 20,000 60,000
Estimated unit product cost $7.05 $9.30 $13.80 $7.80
b) Variable manufacturing overhead = $0.60 * units produced
Quarters
First Second Third Fourth
Number of units produced 80,000 40,000 20,000 60,000
Variable manufacturing
overhead (units * $0.60) $48,000 $24,000 $12,000 $36,000
c) Fixed manufacturing overhead = Total manufacturing overhead minus variable manufacturing overhead
Manufacturing overhead $228,000 $204,000 $192,000 $216,000
Variable overhead $48,000 $24,000 $12,000 $36,000
Fixed manufacturing o/h $180,000 $180,000 $180,000 $180,000
d) Total manufacturing costs per annum:
Total manufacturing costs $564,000 $372,000 $276,000 $468,000
= $1,680,000
Number of units produced 80,000 40,000 20,000 60,000
Total units produced = 200,000 units
Frantic fast foods had earnings after taxes of 460,000 in 20X1 with 310,000 shares outstanding. On January 1 20X2, the firm issued 34,000 new shares. Because of the proceeds from these new shares and other operating improvements, earning after taxes increased by 23 percent.
Oxford Company uses a job order costing system. In the last month, the system accumulated labor time tickets total $24.600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid, which entry should Oxford make to record the indirect labor used?
A) Debit Factory Overhead $4,300, credit Factory Wages Payable $28.900
B) Debit Payroll Expense 524.600credit Factory Wages Payable $28,900.
C) Debit Payroll Expense $28,900, credit Cash $28.900
D) Debit Work in Process Inventory $20,900 credit Factory Wages Payable $28.900.
E) Debit Work in Process Inventory $24600, credit Wages Payable $28.900
Job order costing is a technique to decide the expense of assembling every item.Debit Payroll Expense with 524.600 and credit Factory Wages Payable with $28,900.
What is job order costing system?It is a costing technique which is utilized to decide the expense of assembling every item. This technique is used when the producer creates an assortment of items which are not same and necessities to ascertain the expense for making a singule Item.
Given:
Direct labor cost = $24,600
Indirect labor cost = $4,300
So while passing the general entry we will debit the payroll expense and credit the total factory wages (i.e. Direct as well as Indirect labor cost) with $28,900.
Therefore option B aptly describes the statement.
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On July 1, 20X4, Pillow Corp. obtained significant influence over Sleep Co. through the purchase of 3,000 shares of Sleep's 10,000 outstanding shares of common stock for $20 per share. On December 15, 20X4, Sleep paid $40,000 in dividends to its common stockholders. Sleep's net income for the year ended December 31, 20X4, was $120,000, earned evenly throughout the year. In its 20X4 income statement, what amount of income from this investment should Pillow report
Answer: $18,000
Explanation:
Income from investment is the percentage of the acquired company's income that the company that acquired it will report as their own based on their percentage of ownership.
By purchasing 3,000 shares out of 10,000, Pillow Corp owns;
= 3,000 / 10,000
= 30% of Sleep Co.
These shares were bough on July 1 so the relevant period will be half a year.
At the end of the year, Pillow Corp will report 30% of half of Sleep Co. income as income from investment for the year.
= 30% * 120,000 * 0.5
= $18,000
When Apple introduced its iPhone 11 with Slofie (slow-
motion selfie) capability and a high price tag, it used_______ to avoid direct competition with Samsung,
Google, and others.
Answer:
trademark
Explanation:
When the announcement was made about the iPhone 11's new Slofie (slow- motion selfie) capability, Apple also said it had applied for a US trademark on Slofie.
Note, a trademark is a legally issued right for a symbol, phrase, or word to be used to denote a specific product or service, thus it gives a right of ownership to the trademark applicant. Therefore, it limits direct competition from others.
Answer:
Trademark
Explanation:
A trademark is an intellectual property which consists of a particular design aimed at identifying a product as being from a particular source.
Once a trademark is established on a product other companies will be unable to use that technology nor design without purchasing rights to use the trademark.
Apple first introduced Solfie which is a name coined for slow motion selfie on their iPhone 11.
In order to avoid competition with Samsung, Google, and others they trademarked Slofie thereby preventing competitors from using similar technology
Greystone Inc. plans to pay a $4.30 dividend during the upcoming year, and dividends are expected to grow at the rate of 8% per year. The risk free rate is 6% and the expected return on the market portfolio is 12%. The current price of the stock is $85. What is the estimated beta of Greystone, Inc.
Answer:
Beta = 1.18
Explanation:
The computation of the beta is shown below:
But before that we need to calculate the following calculations
Current stock price = D1 ÷ (Required rate of return - growth rate)
$85 = $4.30 ÷ (Ke - 0.08)
(Ke - 0.08) = 0.0506
Ke = 0.1306
= 13.06%
Now
Expected rate of return(Ke) = Risk free rate + Beta × (Market rate of return - Risk free rate of return)
13.06% = 6% + Beta × (12% - 6%)
13.06% = 6% + Beta × 6%
So, the Beta = 1.18
The individual that has the greatest ability to conduct an external search for information is the consumer that has: Question 20 options: a low level of knowledge about the product category. an extensive knowledge of the product category. some knowledge of the product category, but not enough to make an intelligent decision. a low educational level.
Answer: some knowledge of the product category, but not enough to make an intelligent decision
Explanation: An external search usually may begin with dissatisfaction from a previous purchase, and this is when an individual seeks for alternatives and other information regarding a product. The individual that has the greatest ability to conduct an external search for information is the consumer that has some knowledge of the product category, but not enough to make an intelligent decision. This is because, an individual who has an extensive knowledge of a product category will most likely not spend more time in the external search process than someone with just a moderate level of product category knowledge and the greater the motivation for this individual with some knowledge, the greater the extent of external search for information.
Aaron prefers to fly with Qantas rather than Alaska Airlines because of their better safety record. He prefers Jet Blue to Qantas because they have inflight television. However, he would rather fly Alaska than Jet Blue because they have a better customer satisfaction rating. This preference ranking violates the order rule of the five Rules of Actional Thought. True False
Answer:
True
Explanation:
Five Rules of Actional Thought is often referred to as Five Axiom of Decision Making. It includes the following:
1. Probability
2. Order
3. Equivalence
4. Substitution
5. Choice.
The Order Rule declared that one must be ready to have a decision order without any cycles. This can be expressed as follows: If an individual prefers A to B and B to C, he or she must prefer A to C.
Therefore, in this situation: Aaron prefers Qantas to Alaska, and Jet Blues to Qantas. However, since he would rather fly Alaska than Jet Blue because they have a better customer satisfaction rating, shows CYCLE in his decision order.
Hence, in this case, it is TRUE that this preference ranking violates the order rule of the Five Rules of Actional Thought.
On January 1, 2005, Marcy Company purchased 1,000 shares of its own common stock for $22,000. On February 1, 2005, they sold 600 of these shares for $25 per share, and on March 1, 2005, they sold the remaining 400 shares for $15 per share. The journal entry required on March 1 will include: A) credit Contributed Capital, Treasury Stock, $1,800 B) debit Retained Earnings for $1,800 C) debit Retained Earnings for $2,800 D) debit Contributed Capital, Treasury Stock, $2,800 E) debit Contributed Capital, Treasury Stock, $1,800
Answer: E) debit Contributed Capital, Treasury Stock, $1,800
Explanation:
Treasury stock was bought at price of;
= 22,000/1,000
= $22
Sold 600 for $25 so they made a profit of;
= (25 - 22) * 600
= $1,800
This gain was sent to Contributed Capital, Treasury Stock.
Now that stock is to be sold on March 1, it is sold at $15. Loss from initial purchase is;
= ( 22 - 15) * 400
= $2,800
Debit Contributed Capital, Treasury Stock of the maximum amount it can be debited of to reflect this loss which would be $1,800 which was gained in the February purchase. The rest of the loss will go to Retained earnings.
A company's overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used. Work in Process Inventory Beginning WIP 116,900 Direct materials ? Direct labor ? Applied overhead ? To finished goods ? Ending WIP 152,000 Factory Overhead 116,900 105,210 Finished Goods Inventory Beginning FG 137,100 376,700 349,100
Answer:
The cost of direct materials used is $124,090
Explanation:
Ending Finished Goods = $349,100 - $376,700 = $137,100 - ($27,600)
Ending Finished Goods = $109,500
Calculation of Direct labor
Here, the company's overhead cost is 60% of direct labor cost
Ending factory overhead cost = 60% * Direct labor cost
$109,500 = 60% * Direct labor cost
Direct labor cost = $109,500 / 60%
Direct labor cost = $182,500
Calculation of direct materials cost
Particular Amount
Beginning finished goods inventory $376,700
Add: Ending WIP $152,000
Less: Beginning WIP $116,900
Less: Direct labor $182,500
Less: Ending Factory overhead $105,210
Direct Material Cost $124,090
Hence, the cost of direct materials used is $124,090.
For cost-based pricing in multiple-product companies, which of the following is most likely to be used as a possible cost basis?
a. Direct materials costs
b. Variable selling costs
c. Administrative costs
d. Corporate overhead costs
Answer:
A. i think
Explanation:
Treasury Bonds are issued by the U.S. Government in:_______.I. bearer form.
II. book entry form.
III. minimum denominations of $100.
IV. minimum denominations of $10,000.
Answer:
minimum denominations of $100
Explanation:
These bonds are issued by the United States government in minimum denomination of a 100 dollars.
These bonds have their maturity periods to be greater than 20 years. Before they get to their period of maturity, these kind of bonds earn interest at certain periods. The owner of such a bond would earn an amount that is the same as the principal.
Happy inc.uses the double declining method of depreciation for its truck. The company purchased the truck for $17,200 and a $250 delivery fee. The company expects the truck to last 20 years and have a $2000 salvage value at that date. Calculate the following:
a. Double-declining-balance rate
b. Depreciation expense for year
Answer:
Straight line Rate = 5 %
Double-declining-balance rate= 10%
Double-declining- Depreciation for the year= $1745
Straight Line Depreciation for the year = $ 772.5
Explanation:
a. Double-declining-balance rate
The number of years of life gives us the rate of depreciation .
So life in years = 20
Straight line Rate = 100 %/20 = 5 %
Double-declining-balance rate= 2* Straight line Rate
= 2* 5= 10%
b. Depreciation expense for year
Depreciation expense for year= Double-declining-balance rate* Beginning period book value
= 10 % * ( 17200 + 250) = 10 % * 17450= $1745
Straight Line Depreciation for the year = Cost - Salvage Value / Life in yrs
= 17450 - 2000 / 20 = $ 772.5
