Final answer:
The depreciation expense will be greater for Fire Hut in the first year, and Wind Chime's book value will be higher than Fire Hut's book value in year one. In year two, Fire Hut's book value will be lower than Wind Chime's book value. The comparison of net income in year nine cannot be determined based on the given information.
Step-by-step explanation:
Depreciation is the allocation of the cost of an asset over its useful life. Wind Chime uses the straight-line method, which spreads the cost evenly over the useful life
Fire Hut, on the other hand, uses the double-declining-balance method, which results in higher depreciation expense in the early years.
In the second year, Wind Chime's depreciation expense will be equal to the first year, as the straight-line method does not change over time.
However, Fire Hut's depreciation expense will be lower than the first year because the double-declining-balance method reduces depreciation as the asset's book value decreases.
Book value is the value of an asset on the company's books after deducting accumulated depreciation. In year one, Wind Chime's book value will be higher than Fire Hut's book value because the straight-line method spreads the cost evenly, resulting in a higher book value.
However, in year two, Fire Hut's book value will be lower than Wind Chime's book value because the double-declining-balance method accelerates depreciation, resulting in a higher accumulated depreciation and a lower book value.
Net income is the profit of a company after deducting all expenses from revenues. In year nine, Wind Chime's net income may or may not be greater than Fire Hut's net income,
as it depends on various factors such as revenues, expenses, and other accounting considerations.