Question

Koffman's Warehouse purchased a forklift on January 1, 2017, for $500,000. The forklift is expected to last for five years and have a residual value of $11,000. Koffman's uses the double-declining-balance method for depreciation.

Required:

1. Calculate the depreciation expense, accumulated depreciation, and book value for each year of the forklift's life. If necessary, round any depreciation calculations to the nearest dollar.

Year	Annual Depreciation			Accumulated Depreciation			Book Value
2017	$fill in the blank 9e987403505efec_1			$fill in the blank 9e987403505efec_2			$fill in the blank 9e987403505efec_3
2018	fill in the blank 9e987403505efec_4			fill in the blank 9e987403505efec_5			fill in the blank 9e987403505efec_6
2019	fill in the blank 9e987403505efec_7			fill in the blank 9e987403505efec_8			fill in the blank 9e987403505efec_9
2020	fill in the blank 9e987403505efec_10			fill in the blank 9e987403505efec_11			fill in the blank 9e987403505efec_12
2021	fill in the blank 9e987403505efec_13			fill in the blank 9e987403505efec_14			fill in the blank 9e987403505efec_15

2. Identify and analyze the effect of the transaction for depreciation for 2017.

Activity	operating or investing or financing
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

–

Expenses

=

Income

fill in the blank 81f543fb107cf87_2

fill in the blank 81f543fb107cf87_4

fill in the blank 81f543fb107cf87_5

fill in the blank 81f543fb107cf87_7

fill in the blank 81f543fb107cf87_9

fill in the blank 81f543fb107cf87_10

3. Refer to Exhibit 8-2.

What factors may have influenced Koffman’s to use the double-declining-balance method?

Koffman's may believe that the double-declining-balance method __________ with the revenues produced by the asset. Koffman’s may also choose this method because it allows ___________ depreciation to be taken in the early years of the asset life and thus _________ taxes until the later years.

Answer 1

1. DDB depreciation rate = 2 x 100%/5 years = 2 x 20% = 40%

Year	Annual Depreciation	Accumulated Depreciation	Book Value
2017	200000	200000	300000
2018	120000	320000	180000
2019	72000	392000	108000
2020	43200	435200	64800
2021	53800	489000	11000

2.

Activity	Operating
Accounts	Depreciation expense, Accumulated depreciation
Statement(s)	Income Statement, Balance Sheet

Balance Sheet					Income Statement
Assets	=	Liabilities	+	Stockholders' Equity	Revenues	-	Expenses	=	Net income
-200000		No Entry		-200000	No Entry		200000		-200000

3. Koffman's may believe that the double-declining-balance method matches with the revenues produced by the asset. Koffman’s may also choose this method because it allows higher depreciation to be taken in the early years of the asset life and thus lower/reduce taxes until the later years.

Kindly select appropriately from the options provided since the same have not been given with the question. For any clarifications, write under comments.