Mondova Corporation began operations on January 1. Below is Mondova's current net income statement and December 31 balance sheet calculated using straight-line depreciation.
Note 1: Equipment was purchased on January 1. Straight-line depreciation method was used with an estimated economic life of 5 years.
A. Determine the estimated salvage value of the equipment being depreciated using the straight-line method.
B. Prepare an income statement and balance sheet in the same format as presented above assuming that Mondova Corporation uses the double-declining-balance depreciation method. The equipment has an estimated economic life of 5 years.
C. Calculate and compare Mondova's December 31 current ratio, debt/equity ratio, and debt to assets ratio using the financial statements constructed using the straight-line and double-declining-balance methods of depreciation.

Question

Mondova Corporation began operations on January 1. Below is Mondova's current net income statement and December 31 balance sheet calculated using straight-line depreciation.
  Note 1: Equipment was purchased on January 1. Straight-line depreciation method was used with an estimated economic life of 5 years.
A. Determine the estimated salvage value of the equipment being depreciated using the straight-line method.
B. Prepare an income statement and balance sheet in the same format as presented above assuming that Mondova Corporation uses the double-declining-balance depreciation method. The equipment has an estimated economic life of 5 years.
C. Calculate and compare Mondova's December 31 current ratio, debt/equity ratio, and debt to assets ratio using the financial statements constructed using the straight-line and double-declining-balance methods of depreciation.

Quizplus · Accepted Answer

The Answer of Mondova Corporation began operations on January 1. Below is Mondova's current net income statement and December 31 balance sheet calculated using straight-line depreciation.
  Note 1: Equipment was purchased on January 1. Straight-line depreciation method was used with an estimated economic life of 5 years.
A. Determine the estimated salvage value of the equipment being depreciated using the straight-line method.
B. Prepare an income statement and balance sheet in the same format as presented above assuming that Mondova Corporation uses the double-declining-balance depreciation method. The equipment has an estimated economic life of 5 years.
C. Calculate and compare Mondova's December 31 current ratio, debt/equity ratio, and debt to assets ratio using the financial statements constructed using the straight-line and double-declining-balance methods of depreciation.

Mondova Corporation Began Operations on January 1