Depreciation Question Help

  • Creator
    Topic
  • #197556
    futureCPA
    Member

    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

  • The topic ‘Depreciation Question Help’ is closed to new replies.