Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler uses the double-declining-balance method.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements?

Question

Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler uses the double-declining-balance method.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements?
Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler uses the double-declining-balance method.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements? A) Option A B) Option B C) Option C D) Option D

Quizplus · Accepted Answer

Double-declining-balance rate = (1 ÷ 5) × 2 = 40%
Year 1 depreciation expense = Book value at beginning of year of $90,000 × 40% = $36,000
Depreciation expense decreases assets (by increasing accumulated depreciation, a contra asset account) and stockholders' equity (retained earnings). It increases expenses, which decreases net income. It does not affect the statement of cash flows.

Flagler Company Purchased Equipment That Cost $90,000