Homework Answers
Answer to Part
a.
Straight Line Depreciation per year = (Cost – Salvage Value) /
Useful Life
Straight Line Depreciation per year = ($148,000 - $48,000) /
4
Straight Line Depreciation per year = $25,000
Depreciation Expense for Year 1 = $25,000
Depreciation Expense for Year 2 = $25,000
Answer to Part
b.
Straight Line Depreciation Rate = 1 / Useful Life
Straight Line Depreciation Rate = 1 /4 = 25%
Double Declining Depreciation Rate = 2 * Straight Line
Depreciation Rate
Double Declining Depreciation Rate = 2 * 25% = 50%
Depreciation Expense for Year 1 = $148,000 * 50%
Depreciation Expense for Year 1 = $74,000
Book Value at Year 1 = $148,000 - $74,000
Book Value at Year 1 = $74,000
Depreciation Expense for Year 2 = $74,000 * 50%
Depreciation Expense for Year 2 = $37,000
Answer to Part
c.
Sum of Years’ digit = 4 + 3 + 2 + 1
Sum of Years’ digit = 10
Depreciable Cost = Cost – Salvage Value
Depreciable Cost = $148,000 - $48,000 = $100,000
Depreciation Expense for the year = Remaining Useful Life / Sum of Years’ digits * Depreciable Cost
Depreciation Expense for Year 1 = $100,000 * 4/10
Depreciation Expense for Year 1 = $40,000
Depreciation Expense for Year 2 = $100,000 * 3/10
Depreciation Expense for Year 2 = $30,000
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$693,000 that had a useful life of four years and a salvage value
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