The Company Has a Depreciable Asset with a Purchase Price

question 38

Multiple Choice

The company has a depreciable asset with a purchase price of €500 000 and an estimated residual of €20 000.The company estimates that the asset will generate future economic benefits for the next 10 years.You are not sure about what depreciation method to adopt but would like to be aware of the effect of using different depreciation methods.Which of the following is correct with respect depreciation expense for Year 1?

• A) \[\begin{array} { | l | l | l | }
• \hline \text { Straight line } & \text { Reducing balance } & \text { Sum-of-digits } \\
• \hline \text { Lowest } & \text { Second highest } & \text { Highest } \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | l | }
• \hline \text { Straight line } & \text { Reducing balance } & \text { Sum-of-digits } \\
• \hline \text { Second highest } & \text { Highest } & \text { Lowest } \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | l | }
• \hline \text { Straight line } & \text { Reducing balance } & \text { Sum-of-digits } \\
• \hline \text { Lowest } & \text { Highest } & \text { Second highest } \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | l | l | }
• \hline \text { Straight line } & \text { Reducing balance } & \text { Sum-of-digits } \\
• \hline \text { Highest } & \text { Second highest } & \text { Lowest } \\
• \hline
• \end{array}\]

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