Bing's Export Co. Bing's Export Co.purchased a New Delivery Truck at the Beginning

question 109

Multiple Choice

Bing's Export Co.
Bing's Export Co.purchased a new delivery truck at the beginning of 2015.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2015.The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016.The number of expected miles over five years is 100,000.
-Refer to information for Bing's Export Co.
Bing's is comparing the straight­line and double­declining­balance depreciation methods.Of these two methods, which method creates the larger expense and larger tax savings in 2015?

• A)Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.
• B)Straight-line depreciation creates both the larger expense and the larger tax savings.
• C)Double-declining-balance depreciation creates both the larger expense and the larger tax savings.
• D)Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

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Definitions:

Initial Value Method

An accounting method for investment accounting where the investment is recorded at its cost at the time of purchase, without subsequent adjustments for market changes.

Intra-entity Gross Profit

The profit recognized within a consolidated entity from transactions among its varying parts, not yet realized outside the entity.

Consolidation Worksheet

A document used in the preparation of consolidated financial statements which combines the financial statements of a parent company and its subsidiaries.

Initial Value Method

An accounting approach where investments are recorded at their purchase cost without subsequent adjustments for changes in market value.