Question

 Sullivan Ranch Corporation has purchased a new tractor. The following information is given:

 Prepare the following Straight Line depreciation schedule by using the excel SLN FUNCTION (tx) to calculate the Depreciation Expense for Years 1-4 in the Depreciation Expense column. Enter formulas or absolute cell references the remaining cells.

 Prepare the following Units-of-Production depreciation schedule by entering formulas. Use absolute cell references when appropriate.

 Prepare the following Double-Declining-Balance depreciation schedule by using the Excel DDB FUNCTION (fx) to calculate Depreciation Expense for Years 1-4 in the Depreciation Expense column. Enter formulas or absolute cell references for the remaining cells.

Answer 1

Ans. A	Straight line depreciation = (Cost of asset - Residual value) / Useful life in years
		($150,000 - $10,000) / 4
		$140,000 / 4
		$35,000
	*In Straight line method the depreciation is equal in each year.
	Year	Depreciation	Accumulated depreciation	Net book value
	1	$35,000	$35,000	$115,000
	2	$35,000	$70,000	$80,000
	3	$35,000	$105,000	$45,000
	4	$35,000	$140,000	$10,000
	Accumulated depreciation = Current year depreciation + Sum of previous year depreciations
	*Net book value = Cost of asset - Accumulated depreciation
Ans. B	Units of production depreciation =
	Depreciation per unit =   (Cost of asset - Residual value) / Expected hours
		($150,000 - $10,000) / 1200
		$140,000 / 1200
		$116.67
	Year	Depreciation per unit	Actual hours	Depreciation expense	Accumulated depreciation	Net book value
	1	$116.67	360	$42,000.00	$42,000	$108,000
	2	$116.67	270	$31,500.00	$73,500	$76,500
	3	$116.67	350	$40,833.33	$114,333	$35,667
	4	$116.67	220	$25,666.67	$140,000	$10,000
Ans. C	Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 4
		0.50
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
	Year	Value at the beginning (a)	Depreciation (b = a*0.50)	Accumulated depreciation	Net book value (a - b)
	1	$150,000	$75,000	$75,000	$75,000
	2	$75,000	$37,500	$112,500	$37,500
	3	$37,500	$18,750	$131,250	$18,750
	4	$18,750	$8,750	$140,000	$10,000
	*In double declining balance method the book value at the end of year is the residual value of the assets, so the depreciation
	for year 4 would be calculated by the following way:
	Depreciation =   Remaining value at the beginning - Residual value
		$18,750 - $10,000
		$8,750