On April 29, 2016, Quality Appliances purchased equipment for $266,000. The esti

Question

On April 29, 2016, Quality Appliances purchased equipment for $266,000. The estimated service life of the equipment is six years and the estimated residual value is $23,000. Quality's fiscal year ends on December 31.

Calculate depreciation for 2016 and 2017 using each of the three methods listed. Quality calculates partial year depreciation based on the number of months the asset is in service. (Do not round intermediate calculations.)

2016 2017

1) Straight-line 27,000 40,500

2) Sum-of-the-years' digits

3) Double-declining balance

Explanation / Answer

1 Straight line Opening value Deprciation Closing balance Year 2016*                266,000                  27,000                         239,000 Year 2017*                239,000                  40,500                         198,500 2016* ((266000-23000)/6)/12*8 2017* ((266000-23000)/6) 2 Sum of the year Digit method Opening value Total Depriciable Cost Depriciation Percent Depriciation Book value year end 2016                266,000               243,000 19% (8/12)*(6/21) 46286          219,714 2017                219,714               243,000 25% [(4/12)*(6/21)]+[(8/12)*(5/21)] 61714          158,000 3 Double Declining Opening value Deprciation Closing balance Year 2016*                266,000                  59,111                         206,889 Year 2017*                206,889                  68,963                         137,926 2016* (266000/6*2)/12*8 2017* (206889/6*2)

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