The sayers company purchased a building for $250,000 on January 2, - 15590

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The sayers company purchased a building for $250,000 on January 2, 2010. The building has an expected residual value of $20,000 at the end of its expected life 20 years.

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Prepare a schedule showing the depreciation for 2010 and 2011 and the book value on December 31, 2010 and December 31, 2011 for each of the following methods:

1.       Straight-line

2.       Sum-of-the-years’-digits

3.       Double-declining-balance

4.       150%-declining-balance

5.       Compute the company’s return on assets (net income divided by average assets, as discuss in Chapter6) for each method in 2010 and 2011 assuming that income before depreciation is $50,000. For simplicity, use ending assets and ignore interest, income and other assets. Why does the rate of return increase each year?

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P11-3 Solution and Q.docx
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