Question

4. A piece of equipment is purchased for $110,000 and has an estimated salvage value of $10,000 at the end of the recovery period. (a) Prepare a depreciation schedule for the piece of equipment using the straight-line method with a recovery period of seven years. (b) Prepare a depreciation schedule for the piece of equipment using the sum-of- the-years method. (c) Prepare a depreciation schedule using the 200% declining balance method. (d) Prepare a depreciation schedule using the 150% declining balance method. (20 neinte

Answer 1

Answer is given below with all working notes

Year Straight Line DDB 200% DDB 150% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Totals $14,286 $14,286 $14,286 $14,286 $14,286 $14,286 $14,286 $100,000 Sum-of-the year Method $25,000 $21,429 $17,857 $14,286 $10,714 $7,143 $3,571 $100,000 $31,429 $22,449 $16,035 $11,454 $8,181 $5,844 $4,609 $100,000 $23,571 $18,520 $14,552 $11,434 $8,983 $7,058 $15,881 $100,000 Calculations a) Straight Line method Cost Residual value $110,000 $10,000 7 Years Yearly Depreciation $14,286 7 Sum of Depreciatio Year Digits Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total im $25,000 $21,429 $17,857 $14,286 $10,714 $7,143 $100,000*7/28) $100,000*6/28) $100,000*5/28) $100,000*4/28) $100,000*3/28) $100,000*2/28) $100,000*1/28) 28 $100,000 Year Rate c) 200% DDB method Opening Balance Year 1 $110,000 Year 2 $78,571 Year 3 $56,122 Year 4 $40,087 Year 5 $28,634 Year 6 $20,453 Year 7 $14,609 28.57% 28.57% 28.57% 28.57% 28.57% 28.57% 28.57% Yearly Depreciation $31,429 $22,449 $16,035 $11,454 $8,181 $5,844 $4,609 Closing balance $78,571 $56,122 $40,087 $28,634 $20,453 $14,609 $10,000 Year 7 depreciation will be equal to opening book value -salvage value Double Declining method working -200% number of years useful life Depreciation rate of automobile (1/number of years) DDB Depreciation rate 14.29% 28.57% 200% DDB closing Rate d) 150% DDB method Opening Year Balance Year 1 $110,000 Year 2 $86,429 Year 3 $67,908 Year 4 $53,356 Year 5 $41,923 Year 6 $32,939 Year 7 $25,881 21.43% 21.43% 21.43% 21.43% 21.43% 21.43% 21.43% Yearly Depreciation $23,571 $18,520 $14,552 $11,434 $8,983 $7,058 $15,881 $86,429 $67,908 $53,356 $41,923 $32,939 $25,881 $10,000 Year 7 depreciation will be equal to opening book value - salvage value Double Declining method working - 150% number of years useful life Depreciation rate of automobile (1/number of years) DDB Depreciation rate 14.29% 21.43% 150% DDB