Homework Answers
1)Straight Line method = [cost- salvage value ]/useful life
= [10000 - 2000]/10
= 8000/10
= $ 800 per year
Depreciation expense in year 5 : $ 800
2)
Double declining depreciation rate:
Depreciation rate = 2/ useful life
= 2/10
= .20 or 20%
| Year | Depreciation expense | Book value at end |
| 1 | 10000*20%=2000 | 10000-2000=8000 |
| 2 | 8000*20%=1600 | 8000-1600= 6400 |
| 3 | 6400*20%= 1280 | 6400-1280= 5120 |
| 4 | 5120*20%= 1024 | 5120-1024= 4096 |
| 5 | 4096*20%= 819.20 | 4096-819.20 = 3276.80 |
Depreciation expense for year 5 = $ 819.2
3)Sum of years digit:
sum of digit :10+9+8+7+6+5+4+3+2+1 = 55
Sum of digit to be used in year 5 = 6 [10 in year 1, 9 in year 2 ,8 in year 3 ,7 in year 4]
Depreciation expense for year 5 = [cost-salvage value ]*n/ sum of digit
= [10000- 2000] *6/55
= 8000*6/55
= 872.73
4)MACRS 7 year depreciation
Depreciation rate in year 5 = 8.93% [can be find from MACRS table respectively]
Depreciation expense = 10000*8.93 %= 893
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