1. XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipmen
ID: 2583022 • Letter: 1
Question
1. XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the sum-of-years'-digits method, the net book value of XYZ’s equipment on December 31, 2014, would be:
2. XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the double-declining balance method, accumulated depreciation for XYZ’s equipment on December 31, 2014 would be
Explanation / Answer
1. $ 60000 to be depreciated over 5 years. Sum of digits is 1+2+3+4+5=15. 2014 is second year of operation. Hence Depreciation for 2014 would be 60000*4/15=16000 for full year. Since we are closing the books for December 1/2 of 16000 which is $8000 can be considered.WDV for 2014 would be 70000-20000-8000=42000
2. Straight line Depreciation = (70000-10000)/5 = 12000. St. line depreciation rate=12000/60000=20%
Double declining rate=40%. WDV 2014 would be 70000-24000-7200=38800
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