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

question 53

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.

Evaluate investment projects using incremental cost and total cost approaches.

Understand the basics of capital budgeting and the different methods used for evaluating investment projects.

Learn how to calculate the net present value (NPV) of an investment and understand its importance in investment decision making.

Comprehend the impact of discount rates on the present value of future cash flows.

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Definitions:

Goodwill Impairment

The decrease in the value of goodwill on a company's balance sheet when the carrying amount exceeds the fair value.

Private Companies

Businesses whose ownership is private, meaning their shares are not traded on public stock exchanges, and often their financial information is not disclosed to the public.

Amortization Expense

The gradual reduction of a debt over time or the allocation of the cost of an intangible asset over its useful life.

Fair Value

The revenue generated from liquidating an asset or cost of moving a liability in a coordinated market operation on the day of measurement.