Wexford Co

question 134

Multiple Choice

Wexford Co.purchased a new delivery truck at the beginning of 2016.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 2016.The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017.The number of expected miles over five years is 100,000.
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-Refer to information for Wexford Co. ​
Wexford's is comparing the straight-line and double-declining-balance depreciation methods.Of these two methods, which method creates the larger expense and larger tax savings in 2016?

• 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:

Total Sales

The sum of all revenue generated from the sale of goods or services in a specific period before any deductions.

Exclusive Franchise

A licensing agreement giving a single franchisee the right to be the only provider of the franchisor's product or service in a specific geographical area.

Variable Selling

Variable selling refers to the costs associated with selling products that vary with the level of sales activities, such as commissions and shipping expenses.

Administrative Expense

Costs related to the general operation of a business, including executive salaries, legal and financial fees, and other overhead costs.