Questions and Problems: Using Financial Information

  1. The DoeDoe Company purchased an asset for $2 million. This asset has a salvage value of $50,000 and is to depreciated over a 15 year life.
    1. What is the depreciation expense for the first year of the asset's life using straight-line depreciation? using sum-of-the-years' digits depreciation?
    2. What is the depreciation expense for the last year of the asset's life using straightline depreciation? using sum-of-the-years' digits depreciation?

  2. Which depreciation method provides the greatest net income early in the life of an asset: straight-line or declining balance?

  3. Suppose a company has assets of $5 million and liabilities of $3 million. What is this company's book value of equity?

  4. The Jackson Company has the following amounts recorded: What is the book value of equity for Jackson Company?

Solutions