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Testbank Problem 134 On July 1, 2020, Blue Spruce Company purchased for $6,660,000 snow-making equipment having...

Testbank Problem 134

On July 1, 2020, Blue Spruce Company purchased for $6,660,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $277,500. 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 $6,660,000 $6,660,000
Less: Accumulated Depreciation $

$

Year-End Book Value

Depreciation Expense for the Year

Double-Declining Balance Method
Equipment $6,660,000 $6,660,000
Less: Accumulated Depreciation $

$

Year-End Book Value

Depreciation Expense for the Year

Assume the company had used straight-line depreciation during 2020 and 2021. During 2022, the company determined that the equipment would be useful to the company for only one more year beyond 2022. Salvage value is estimated at $370,000.

Compute the amount of depreciation expense for the 2022 income statement.
Depreciation expense $


Assume the company had used straight-line depreciation during 2020 and 2021. During 2022, the company determined that the equipment would be useful to the company for only one more year beyond 2022. Salvage value is estimated at $370,000.

What is the depreciation base of this asset?
Depreciation base $

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Answer #1

1.

2020 2021
Sum-of-the-years-digits method
Equipment $ 6,660,000 $ 6,660,000
Less: Accumulated Depreciation 2,987,500 1,063,750
Year end Book Value 3,681,500 5,596,250
Depreciation Expense for the year 1,914,750 1,063,750
Double declining balance method
Equipment $ 6,660,000 $ 6,660,000
Less: Accumulated Depreciation 3,463,200 1,332,000
Year end Book Value 3,196,800 5,328,000
Depreciation Expense for the Year 2,131,200 1,332,000
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