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:

Merchandise Inventory

Merchandise inventory represents the goods a company has in stock that are ready to be sold in the normal course of business.

Accounts Payable

Accounts payable are liabilities representing the amounts that a company owes to creditors for purchases or services rendered that have not yet been paid.

Supplies Expense

The cost associated with using up supplies during an accounting period, which is recorded as an expense.

Merchandise Inventory

The total value of a company's goods available for sale to customers, typically recorded as an asset on the balance sheet.