Question

22. On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four year useful life and an $8,000 salvage value. If Marino uses the double-declining-balance method, Which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company’s financial statements? a- Balance Shee Assets Cash Truck Acc. Dep. Liab. Equity 4,000 NA NA NA 4,000 NA ncome Statement Expo Net Inc. 4,000 4,000 Cash Flow Statement NA b- Picture c- Picture d- Picture

Answer 1

	Balance Sheet									Cash flow
	Assets						Income statement			Statement
Cash +	Truck	- Acc. Dep	Liab. +	Equity		Rev. -	Exp. =	Net inc.
NA	NA	4000	NA	(4000)		NA	4000	(4000)		NA
Workings:
An asset cannot be depreciated below its depreciable cost
Depreciable cost = 48000-8000 = $40000
Depreciation expense:
Year 1	24000	=48000*50%
Year 2	12000	=(48000-24000)*50%
Year 3	4000	=40000-24000-12000