Question

The cost recovery method for new farm equipment is 200% declining balance.

a. True
b. False

Answer 1

The cost recovery method for new farm equipment is not 200% declining balance.The statement is false.

Step-by-step explanation:

The cost recovery method for new farm equipment is 200% declining balance.

This statement is False. The cost recovery method for new farm equipment is typically calculated using the straight-line method, not the declining balance method.

The straight-line method allocates the cost of the equipment evenly over its useful life, while the declining balance method allocates more of the cost in the early years and less in the later years.

Answer 2

The cost recovery method for new farm equipment is 200% declining balance, the given statement is b. false because it is the declining balance method, which allows for higher depreciation in the early years and gradually reduces the expense over time.

Step-by-step explanation:

The correct method is called the declining balance method, but it does not have a fixed rate of 200%. In reality, the declining balance method allows for a higher depreciation expense in the earlier years of an asset's life and gradually reduces the expense over time. This method is commonly used for assets that lose value quickly in the early years, such as farm equipment.

Let's say you purchase a new tractor for $50,000. The declining balance method might allow you to write off 20% of the asset's value each year. In the first year, you would deduct $10,000 (20% of $50,000) from your taxable income. In the second year, you would deduct 20% of the remaining balance, and so on.

In summary the given statement is b. false , the cost recovery method for new farm equipment is not 200% declining balance. It is the declining balance method, which allows for higher depreciation in the early years and gradually reduces the expense over time.