Q18. The answer is c. Can someone please explain ?!!
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Do you have the solution to this question? How is it possible that depreciation in year 4 using SLM is more than double declining method.
C is correct. Shifting at the end of Year 2 from double-declining balance to straight-line depreciation methodology results in depreciation expense being the same in each of Years 3, 4, and 5. Shifting to the straight-line methodology
at the beginning of Year 3 results in a greater depreciation expense in Year 4 than would have been calculated using the double-declining balance method.
Depreciation expense Year 4 (Using double-declining balance method all five years)
= 2 × Annual depreciation % using straight-line method × Carrying amount at end of Year 3
= 40% × $43,200
Depreciation expense Year 4 with switch to straight-line method in Year 3
= 1/3 × Remaining depreciable cost at start of Year 3
= 1/3 × $72,000
= $24,000
Fair enough. My bad I did not understand question properly. I thought it is asking that if first 2 years it is double declining and than we shift to SLM in that year 4 dep will be greater than year 2 or year 1’s dep. Which is not possible.
I understood my mistake.
I hope you understood the question.?