A medical practice purchases computer equipment that cost $15,000 to be used for

Question

A medical practice purchases computer equipment that cost $15,000 to be used for medical billing. In addition, the practice purchases billing software that cost $5,000. Both the computer equipment and the software are expected to have 3-year useful lives and no salvage value.

Please calculate the Three years of depreciation using straight-line, double declining balance, and sum-of-the-years digits.

Asset Cost:

Salvage Value:

Asset Life:

Straight-line Depreciation Each Year #DIV/0!

Asset Cost: $0
Salvage Value: $0
Asset Life: 0
Depreciation Year

Double Declining Balance Depreciation #NUM!

Asset Cost: $0
Salvage Value: $0
Asset Life: 0
Depreciation Year

Sum of the Years Digits Depreciation #NUM!

** Note: By the end of the third year, the DDB method must take enough depreciation in total to have accumulated depreciation equal to the
Depreciable Base. Therefore the depreciation in the last year is computed by subtracting the accumulated depreciation at the end of the
second year from the depreciable base of $20,000

Straight Line Double Declining Balance ** Sum-of-the years Digits Annual Accumulated Annual Accumulated Annual Accumulated Year Depreciation Depreciation Depreciation Depreciation Depreciation Depreciation                       1 $0 $0 $0                       2 $0 $0 $0                       3 $0 $0 ** $0

Explanation / Answer

Solution:

Cost of computer equipment & Billing software = $15,000 + $5,000 = $20,000

Life = 3 Years

Depreciation rate (Straight Line) = 1/3 = 33.33%

Depreciation rate (Double Declining Balance) = 33.3333*2 = 66.67%

Computation of Depreciaton - Straight Line Year Opening balance of Assets Depreciation Accumlated Depreciation Closing Balance of Assets 1 $20,000.00 $6,666.67 $6,666.67 $13,333.33 2 $13,333.33 $6,666.67 $13,333.33 $6,666.67 3 $6,666.67 $6,666.67 $20,000.00 $0.00

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