Dr. Matt Brown purchased a new X-ray machine for his dental practice. The machin

ID: 2563192 • Letter: D

Question

Dr. Matt Brown purchased a new X-ray machine for his dental practice. The machine cost $275,000, and has a $10,000 salvage value after 7 years.
As shown in the text, spreadsheet software packages, like Microsoft Excel, include built in functions to calculate depreciation. Use these routines to calculate depreciation for Dr. Brown's x-ray machine for the third year of use. Try this problem with the straight-line (SLN) and double-declining balance (DDB) techniques. The functions are usually accessed via a toolbar pick list () or from the Insert/Function operation. Once you know the correct way to structure a function, a quick shortcut is to simply key in the formula (e.g., SLN(100,10,4) is the straight-line formula for a $100 asset having a $10 salvage value and 4 year life).
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You should print out two copies of your answer; one with the "values" and the other showing the "formulas." Oftentimes, you will want to view all the formulas used in a worksheet. To toggle between showing formulas and values, simply press "CTRL + `" (grave accent).

Results:

Straight line result

Double-declining result
Formulas:

Straight line result

Double-declining result

Explanation / Answer

RESULTS.

Calculation of Double Declining method :

Opening Book Value (Amount in $)

(A)

Calculation of Depreciation (2 × Straight Line rate × opening book value

Amount of Depreciation ((Amount in $)

(B)

Closing Book Value (Amount in $)

(A-B)

275,000

2 x (1 / 7) x 275,000

78,571.43

196,428.57

2 x (1/ 7) x 196,428.57

56,122.45

140,306.12

2 x (1 / 7) x 140,306.12

40,087.46

100,218.66

NOTE: Salvage value is not considered while calculating the Double Declining method depreciation.

STRAIGHT LINE METHOD OF DEPRECIATION:

Depreciation each year = (Cost of Asset - Salvage Value) / Useful life of asset

= ($275,000 - $10,000) / 7 = $37,857.143

Results:

Straight Line Method = $37,857.143

Double Declining Method = $40,087.46

FORMULA For Depreciation in excel:

Double declining method = DDB($275,000, $10,000, 7, 3, 2)

Where 2 is the multiplying factor, 3 is the year of depreciation, 7 is the useful life of asset

Straight Line method = SLN($275,000, $10,000, 7)