Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acq

Question

Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $562,500 on March 1 at the beginning of a fiscal year, has an estimated useful life of five years and an e value of $48,400. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, on March 4, the equipment was sold for $82,400. Required: 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the b equipment at the end of each year by the following methods: a. Straight-line method Year Depreciation Expense $ 102,860 $ 102,860 Nm+ in Accumulated Depreciation, End of Year $ 102,860 $ 205,720 $ 308,580 $ 411,440 Book Value, End of Year $ 459,640 $ 356,780 $ 253,920 $ 151,060 $ 48,400 $ 102,860 $ 102,860 $ 102,860 $ 514,300 b. Double-declining-balance method Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year Year

Explanation / Answer

*Here,the requirement is considered as calculation of depreciation under double declining balance method for estimated 5 years.

Here under straight line method please change your depreciation for $102820 [i.e ($562500-$48400)/5]

Answer:

Depreciation rate under double diminishing balance method:

Rate per year×200%=1/5years×200%=40%

Calculation of depreciation under double diminishing balance method:

225000

[$562500×40%]

135000

[$337500×40%]

81000

[$202500×40%]

48600

[$121500×40%]

*The depreciation for last year under double diminishing balance method will be difference of year end 4- residual value.

Year Depreciation expense($) accumulated depreciation at the end of the year($) Book value at the year end($) 1

225000

[$562500×40%]

225000 337500 2

135000

[$337500×40%]

360000 202500 3

81000

[$202500×40%]

441000 121500 4

48600

[$121500×40%]

489600 72900 5 24500* 514100 48400

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