Question

On July 1, 2020, Blue Spruce Company purchased for $3,060,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $127,500. Depreciation is taken for the portion of the year the asset is used. Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the 1. sum-of-the-years'-digits method. 2. double-declining balance method. 2020 2021 Sum-of-the-Years'-Digits Method Equipment Less: Accumulated Depreciation $3,060,000 $3,060,000 Year-End Book Value Depreciation Expense for the Year Double-Declining Balance Method Equipment Less: Accumulated Depreciation Year-End Book Value $3,060,000 $3,060,000 Depreciation Expense for the Year

Answer 1

Calculation of Depreciation a. Sum of the year digit method 12+3+4+5-15 Total cost - $ 3,060,000 legt. Salice value - $ (127,500) Depreciation base - $ 2,932,500 2010 - $ 2,982,500x5 $947,500 2021- $ 1,955,000x $ 521,333 ($ 2,932,500 - $9+7,500) 2 Double decling balance method Rate Ys - 20% 2020 - $ 3,060,000x 2 x 20% = $1,224.000 2021 - $ 1,886,000 V 2x2042 $ 734,400 200) 2020 Sum-Ol-the-yeau-digit method equipment $ 3,060,000 lex accurrelated Sep $o Yeal and Book valu 369531000 $2082,500 Dep expense for year $977,500 $ 3,060,000 $ 94 7,500 $ 1,561,167 $521,333.

202 2000 Deceble Declening balance method Equipment $3,060,000 len Accumulated Dep $ 3,060,000 $ 1,224.000 $ 1,101,600 year end book value $ 1,836,000 $1,224,000 Dep exp to the year $734,400 * Straight line method: De preciation box - $ 2,932,500 Total cafe - 5 Dep. tol year = $2,932,500 $ 586,500 Por 2 yeces - $ 586,500x 2 - $ 1,173,000 Boor value at year end - Meteo C2 year) $1,88+1000 only tour 2 yeans $ 1,884,000 - $ 170,000 . $ 1,71HOOO - 2 $858,500 Depreciation expense (2022) - $ 858,500 Depreciation base = $ 1,884,000 - $170,000 = $ 1,717,000 Depucciation base = $ 1,717,000