Question

Monty Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years'-digits method, and (3) the double-declining-balance method.

Year		Straight-Line				Sum-of-the- Years'-Digits				Double-Declining- Balance
1			$10,620				$17,700				$23,600
2			10,620				14,160				14,160
3			10,620				10,620				8,496
4			10,620				7,080				5,098
5			10,620				3,540				1,746
Total			$53,100				$53,100				$53,100

What is the cost of the asset being depreciated?

Cost of asset

$

What amount, if any, was used in the depreciation calculations for the salvage value for this asset?

Salvage value

Which method will produce the highest charge to income in Year 1?

The method that produces the highest charge to income in Year 1 is

Which method will produce the highest charge to income in Year 4?

The method that produces the highest charge to income in Year 4 is

Which method will produce the highest book value for the asset at the end of Year 3?

The method that produces the highest book value for the asset at the end of Year 3 is

If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

The method that will yield the highest gain (or lowest loss) on disposal of the asset if the asset is sold at the end of Year 3 is

Answer 1

Question : What is the cost of the asset being depreciated?

Answer

53100

$

What amount, if any, was used in the depreciation calculations for the salvage value for this asset?

Answer : Salvage value = Nil or zero

Question :Which method will produce the highest charge to income in Year 1?

Answer : Double declining method

as depreciation charge is lowest
Question : Which method will produce the highest charge to income in Year 4?

Answer

The straight line method will produces the highest charge to income in Year 4 is

Question : Which method will produce the highest book value for the asset at the end of Year 3?

Answer

The straight line method will produces the highest book value for the asset at the end of Year 3 is

Question If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

Answer

The double declining method that will yield the highest gain (or lowest loss) on disposal of the asset if the asset is sold at the end of Year 3 is

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