For the year 20X1, the Landmark Restaurant had sales of $800,000 and expenses of $700,000 excluding...

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For the year 20X1, the Landmark Restaurant had sales of $800,000 and expenses of $700,000 excluding...

For the year 20X1, the Landmark Restaurant had sales of $800,000 and expenses of $700,000 excluding depreciation. The building is being leased and the only depreciable asset is equipment in the amount of $100,000. The equipment has a life of ten years with zero salvage value.

Required:

Calculate the earnings before taxes for 20X1 if:

1. The equipment is depreciated under straight-line depreciation

2. The equipment is depreciated under double-declining balance depreciation

business accounting

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Answer 1

Answer #1

Answer

Requirement 1

>Working

A	Cost	$ 100,000.00
B	Residual Value	$ -
C=A - B	Depreciable base	$ 100,000.00
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$ 10,000.00

>Earnings before taxes = $ 800000 sales - $ 700000 expense - $ 10000 depreciation = $ 90,000

Requirement 2

>Working

A	Cost	$ 100,000.00
B	Residual Value	$ -
C=A - B	Depreciable base	$ 100,000.00
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$ 10,000.00
F=E/C	SLM Rate	10.00%
G=F x 2	DDB Rate	20.00%

Earnings before taxes = $ 800000 sales - $ 700000 expense – ($100000 x 20%) depreciation
= 800000 – 700000 – 20000
= $ 80,000

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Answer 2

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For the year 20X1, the Landmark Restaurant had sales of $800,000 and expenses of $700,000 excluding...

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