Buffalo Company purchased accounting period is the calendar year. a new plant as

Question

Buffalo Company purchased accounting period is the calendar year. a new plant asset on April 1, 2017, at a cost of $767,880. It was estimated to have a service life of 20 years and a salvage value of $64,800. Buffalo's for this asset for 2017 and 2018 using the sum-of-the-years'-digits method. (Round answers to o 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 Depreciation for 2018 Click if you would like to Show work for this question: Open Show Work

Explanation / Answer

CALCULATION OF THE DEPRECIATION AS PER SUM OF DIGITS METHOD Purchase Cost of Machine $            7,67,880.00 Less: Salvage Value $                64,800.00 Net Value for Depreciation $            7,03,080.00 SUM OF DIGITS = 1+2+3+4+5+6+7+8 +9+10+11+12+13+14+15+16+17+18+19+20=210 For the year 2017 Depreciation for the year Depreciation for the year 2017 = $                50,220.00 ($ 7,030,080 X 20/210 = $ 66,960 * 9/12) Depreciation for the year 2018 For First of 3 months as first year $                16,740.00 ($ 7,030,080 X 20/210 = $ 66,960 * 3/12) For Balance of 9 months ($ 7,030,080 X 19/210 = $ 63,612 * 9/12) $                47,709.00 Depreciation for the year 2018 = $                64,449.00 Answer = Depreciation for the year 2017 = $                50,220.00 Depreciation for the year 2018 = $                64,449.00 CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Machine $            7,67,880.00 Useful Life = $                        20.00 Depreciation per year =(1 / 20 Years) $                          0.05 So the depreciation per year = 5% But, As per the double decline method = (5% X 2) 10% Rate of Depreciation = 0.10 or 10% For the first year there is only 9 months so Depreciation rate = 10% * 9/12 = 7.5% CACLULATION OF THE DEPRECIATION FOR THE YEAR 2017 AND 2018 Assets Value =                7,67,880.00 Depreciation for the year 2017 @ 7.5% = $                57,591.00 ($ 767,880 * 7.5%) Closing Book Value for the year 2017 = $            7,10,289.00 Opening Balance for the year 2018 $            7,10,289.00 Depreciation for the year 2018 @ 10% = $                71,028.90 Answer = Depreciation for the year 2017 =                    57,591.00 Depreciation for the year 2018 =                    71,028.90

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