Question

Jing Company was started on January 1, 2016 when it issued common stock for $38,000 cash. Also, on January 1, 2016 the company purchased office equipment that cost $16,200 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,300. The equipment had a five-year useful life and a $6,000 expected salvage value.

3.

Required information

Using double-declining balance depreciation, determine the amount of depreciation expense and the amount of accumulated depreciation that would appear on the December 31, 2018 financial statements.

$0/$16,800.

$6,192/$16,512.

$660/$12,500.

$3,715/$20,515.

4.

Required information

Assume that Jing Company earned $25,400 cash revenue and incurred $16,000 in cash expenses in 2018. Using straight-line depreciation and assuming that the office equipment was sold on December 31, 2018 for $9,900, the amount of net income or (loss) appearing on the December 31, 2018 income statement would be:

($2,220).

$5,800.

$3,420.

$5,580.

Answer 1

Book value of asset = 16200 + 2300 = 18500

Straight line depreciation rate = 1/5 *100= 20%

Double declining depreciation = 2 * Straight line depreciaition rate * Book value at beginning of year

= 2 * 20% * 18500 = 7400

Double declining depreciaiton for 2nd year = 2 * 20% * (18500 -7400) = 4440

Double declining depreciaiton for 3rd year = 2 * 20% * (18500 - 7400 -4440) = 2664

However, the asset can only be dereciated till 12500 because 6000 is salvage value

hence depreciation for 3rd year = 12500 - 7400 - 4440 = 660

ANd accumulated depreciation = 12500

2) Net income = Sales - costs - loss on sale of equipment - depreciaiton

Straight line depreciation for 3 years = (18500 - 6000) /5 * 3 = 7500

Book value of equipment as on 3rd year = 18500 - 7500 = 11000

Net income = 25400 - 16000 - (11000 - 9900) - 2500

= 5800