Balance of accumulated depreciation

1. Explain the difference between earnings and comprehensive income. Why is this important?

2. What are the two types of other changes in equity? Why are they important?

3. Why are discontinued operations and extraordinary items shown net of tax on the income statement?

Lambert Company purchased an asset for $525,000. It has an expected useful life of 10 years and no salvage value. Lambert uses the double-declining-balance depreciation method.

Required: Use a computer spreadsheet package.

A. Prepare a schedule that indicates the depreciation expense, ending balance of accumulated depreciation, and ending book value of each year of the asset’s life. (Do not be alarmed if you still have a book value at the end of 10 years.)

B. Because double-declining-balance does not balance to zero, particularly when the cost of the asset is high and the salvage value is low, companies often switch to straight-line depreciation sometime during the life of the asset. Determine when Lambert should switch to the straight-line method and prepare a schedule as indicated in part (A).


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