CPAnet Forum: depreciation

Active Topics

Memberlist

Help

FAR STUDY GROUP
CPAnet Forum : FAR STUDY GROUP

Topic: depreciation (

Topic Closed)

Author

Message

<< Prev Topic | Next Topic >>

WTBCPA
Newbie
Newbie

Joined: 01 Jun 2011
Online Status: Offline
Posts: 44

Posted: 14 Sep 2011 at 15:06 \| IP Logged

On January 1, year 5, Crater, Inc. Purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10-year life. The equipment was sold December 31, Year 9, for 50% of its original cost. If the equipment's disposition resulted in a reported loss, which of the following depreciation methods did Crater use?

a. composite
b. sum-of-the-year's digits
c. straight-line
d. double-declining balance

the answer is C.
could someone help me with this question, please? How would you rule out the others once you see the question?

Thank you for your help.

jemje2006
Contributor

Joined: 27 May 2010
Location: United States
Online Status: Offline
Posts: 78

Posted: 14 Sep 2011 at 18:52 \| IP Logged

assume it has $1000 original cost and $200 salvage value. so price sold should be $500 which is 50% of original cost.

at end of year 9, book value depreciated 4 years to $680.
so $500-680=a reported loss.

all you need to do is to apply each depreciation method for the book value at end of year 9, and then you know which is the reported loss.

__________________
REG 69, 7/15/2010 85 passed
BEC 71, 8/30/2010 80 passed
AUD 62, 2/10/2011 79 passed
FAR 40, 8/30/2011 79 passed
CA candidate
all done!!!

Sorry, you can NOT post a reply.
This topic is closed.

Printable version

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum