CALCULATOR FULL SCREEN PRINTER VERSION .BAO Exercise 11-3 NEXT Tamarisk Company

Question

CALCULATOR FULL SCREEN PRINTER VERSION .BAO Exercise 11-3 NEXT Tamarisk Company purchased a new plant asset on April 1, 2017, at a cost of $846,090. It was estimated to have a service life of 20 years and a salvage value of $71,400. Tamarisk's accounting period is the calendar year. Compute the depreciation for this asset for 2017 and 2018 using the sum-of-the-years-digits method. (Round answers to o decimal places, e.g. 45,892.) Depreciation for 2017 $ Depreciation for 2018 Compute the depreciation for this asset for 2017 and 2018 using the double-declining-balance method. (Round answers to o decimal places, e.g. 45,892.) Depreciation for 2017 s Depreciation for 2018 s Click if you would like to Show Work for this question: Open Show Work SAVE FOR LATER SUBMIT ANSWER Question Attempts: Unlimited Version 4.24.2.4 11:00 AM 2000-2012John Wiley asons.InG. All Rights Reserved. A Division of John wo acePolicy

Explanation / Answer

Computation of Depreciation as per sum of years of digits methods

Applicable rate = No . of years of estimated life left at the beginning of the year / SYD

where SYD = n(n+1) / 2 ; n = estimated useful life

SYD = 20 *(20+1) / 2 = 210

Depreciation ($) = ( Cost - Salvage Value ) * Applicable rate

Computation of Depreciation by double decline method

Depreciation by DDB = 2 * SLM rate * Book value at the beginning of the year

Where SLM rate = 1 / estimated useful life = 1/20 = 5 %

Depreciation for 2017 = 2 * 5 % * $846,090 * 9/12 = $63,457

Depreciation for 2018 = 2 * 5 % * ($846,090 - $63,457) = $78,263

Year Remaining estimated life during the year Applicable % Working Depreciation Amount ($) 2017 20 years 20 /210 ($846,090-$71,400) * 20/210 * 9 /12 $55,335 2018(till March 2018) 20 years 20 /210 ($846,090-$71,400) * 20/210 * 3 /12 $18,445 2018 (Apr - Dec) 19 years 19/210 ($846,090-$71,400) * 19/210 * 9 /12 $52,568 Total Depreciation for 2018 $71013

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