Ferris purchased equipment that cost $45,000. The equipment had a useful life of 5 years and a $5,000 salvage value. Ferris used the double-declining-balance method to depreciate its assets. Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the company's financial statements?

Question

Quizplus · Accepted Answer

$45,000 cost x (2 x 20%) = $18,000 depreciation expense. Depreciation expense decreases assets by increasing accumulated depreciation and increases expenses, which decreases net income and equity. It does not affect cash flows.

Ferris Purchased Equipment That Cost $45,000