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A fixed asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life. How would using the sum-of-the-year’s-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the fixed asset?
Gain Loss
a. Decrease Increase ANSWER
b. Increase Increase
c. Increase Decrease
d. Decrease Decrease
I assumed a cost of 100 to get to the NBV for year 2 and a selling price of $50 to figure out the gain or loss. I am not understanding the logic behind the answer explanation below from Becker. Please help. Thanks!
After two years, SYD results in higher NBV than DDB, and, therefore, a decreased gain, or an increased loss.
REG - 70, 72, retake at end of Nov.
BEC - PASS
FAR - 10/20/2015
AUD - PASS
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