On January 1, Year 1, Warren Company purchased a machine for $120,000. Warren estimated the useful life of the machine to be 10 years and the salvage value to be $20,000. Indicate whether each of the following statements is true or false.a)Depreciation expense for Year 1 under the straight-line method would be $12,000.b)Depreciation expense for Year 1 under the double declining method would be $24,000.c)The accumulated depreciation at the end of Year 2 under the straight-line method would be $20,000.d)The accumulated depreciation at the end of Year 2 under the double declining method would be $48,000.e)The book value of the machine under both the double declining method and the straight-line method at the end of 10 years would be $20,000.

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Quizplus · Accepted Answer

b)True c)True d)False e)Ta)This is false. Annual depreciation expense = ($120,000 − $20,000)÷ 10 years = $10,000b)This is true. Year 1 Depreciation expense = $120,000 × (2 × 10%)= $24,000c)This is true. Accumulated depreciation at the end of Year 2 = $10,000 annual depreciation × 2 years = $20,000d)This is false. Year 1 Depreciation expense = $120,000 × (2 × 10%)= $24,000; Year 2 Depreciation expense = ($120,000 − $24,000)× (2 × 10%)= $19,200; Accumulated depreciation at end of Year 2 = $24,000 + $19,200 = $43,200e)This is true. Regardless of depreciation method, the book value of an asset will be equal to its salvage value at the end of its useful life.

On January 1, Year 1, Warren Company Purchased a Machine