Consider the following scenario:
Balls and Bats, Inc. purchased equipment on January 1, 2005, at a cost of $100,000. The estimated useful life is 4 years with a salvage value of $10,000.
Complete the following tasks for this assignment:
- Prepare two different depreciation schedules for the equipment—one using the double-declining balance method, and the other using the straight-line method. (Round to the nearest dollar).
- Determine which method would result in the greatest net income for the year ending December 31, 2005.
- How would taxes affect management’s choice between these two methods for the financial statements?