A Construction company XYZ purchased a Crane for $600,000 and it will have a Salvage value...
A Construction company XYZ purchased a Crane for $600,000 and it will have a Salvage value of $60,000 at the end of its useful life. Company XYZ uses a 150% Declining-Balance Depreciation Method with a Switchover to Straight-Line Depreciation Method. Calculate the required Depreciation amounts for every year, identify the year that the Switchover will occur to Straight-Line Method, and fill all required amounts in the given TABLE below. List all your calculations below the table.
| Year, K | ||||
Please show all calculations, and please no Excel usage. Will rate. Thank you.
Homework Answers
| Year | Book Value | Depreciation 150% | SLM | Depreciation | BV EoY |
|---|---|---|---|---|---|
| 0 | $ 600,000 | - | - | - | $ 600,000 |
| 1 | 600,000 | 0.1875×600,000 =112,500 | 0.125*(600000-60000) = 67,500 | 112,500 | 487,500 |
| 2 | 487,500 | 0.1875*487,500 = 91406.25 | (487500-60000)/7= 61,071.43 | 91,406.25 | 396,093.75 |
| 3 | 396,093.75 | 74,267.58 | (396,093.75-60000)/6=56,015.625 | 74,267.58 | 321,826.17 |
| 4 | 321,826.17 | 60,342.41 | (321,826.17-60,000)/5= 52,365.23 | 60,342.41 | 261,483.46 |
| 5 | 261,483.46 | 49,028.21 | (261,483.46-60000)/4)= 50,370.94 | 50,370.94 | 211,112.82 |
| 6 | 211,112.82 | 39,583.65 | 50,370.94 | 50,379.94 | 160,741.88 |
| 7 | 160,741.88 | 30,139.10 | 50,370.94 | 50,370.94 | 10,370.94 |
| 8 | 110,370.94 | 20,694.55 | 50,370.94 | 50,370.94 | 60,000 |
Straight line method depreciation charges = (1/8) = 12.5% every year
150% DB depreciation = 1.5 × 12.5 = 18.75% every year
Here useful life is not given thus I have assumed it by counting number of rows provided. PleaSe contact if having any doubt.
Please refer the attached picture solved it using excel too got the same answer
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