Question 1 Blossom Company purchases equipment on January 1, Year 1, at a cost o
ID: 2574700 • Letter: Q
Question
Question 1 Blossom Company purchases equipment on January 1, Year 1, at a cost of s273,000. The asset is expected to have a service life of 6 years and a salvage value of $20,000 Compute the amount of depreciation for each of Years 1 and 2 using the straight-line depreciation method. Depreciation for Year 1 s Depreciation for Year 2 Compute the amount of depreciation for each of Years 1 and 2 using the sum-of-the-years-digits method. Depreciation for Year 1 Depreciation for Year 2 Compute the amount of depreciation for each of years 1 and 2 using the double-declining-balance method. (Round answers to 0 decimal places, e.g. 45,892.,) Depreciation for year Depreciation for Year 2sExplanation / Answer
Answer:
1
Depreciation using Straight Line method
= (Initial Inv - Salvage)/life
= (273000-20,000)/6
= 42166.67 per year depreciation
year
Beginning
Book value
Depreciation
Accumulated
depreciation
Ending
Book value
Year-1
273,000
42,166.67
42,167
230,833
Year-2
230,833
42,166.67
84,334
188,666
year
Depreciation
Year-1
42166.67
Year-2
42166.67
_________________________________________
2
Depreciation as per sum of method
=6+5+4+3+2+1
=21
base of depreciation
=273000-20,000
=253,000
Now we will calculate the depreciation as per sum of digit method as under
year
Beginning
Book value
Calculation
Depreciation
Accumulated
depreciation
Ending
Book value
Year-1
273000
253000*6/21
72285.7143
72285.71429
200714.3
Year-2
200714.286
253000*5/21
60238.0952
132523.8095
140476.2
year
Depreciation
Year-1
72285.7143
Year-2
60238.0952
_______________________________________
3
Double Declining balance method of depreciation
In DDB method we take the dedication 200% then what we take in straight line
So deprecation as per DDB
=200% x (100/6)
=200% x16.67%
=33.33%
year
Beginning
Book value
Calculation for depreciation
Depreciation
Accumulated
depreciation
Ending
Book value
Year-1
273,000
273000*33.33%
90990.9
90,991
182,009
Year-2
182,009
182009.33.33%
60663.60
151,654
121,346
year
Depreciation
Year-1
90990.9
Year-2
60663.60
year
Beginning
Book value
Depreciation
Accumulated
depreciation
Ending
Book value
Year-1
273,000
42,166.67
42,167
230,833
Year-2
230,833
42,166.67
84,334
188,666
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