Question

Use the following information for the Exercises below. (The following information applies to the questions displayed below.) In early January 2017, NewTech purchases computer equipment for $271,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $25,000. Exercise 10-7 Straight-line depreciation LO P1 Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation. Straight-Line Depreciation Choose Numerator: Choose Denominator: Annual Depreciation Expense = Depreciation expense Year-End Book Value Year Annual Depreciation 2017 2018 2019 2020

Answer 1

Exercise 10-7 Straight Line Depreciation

Depreciation = [Cost - Salvage Value/Residual value]/Useful Life

Given that,

Cost = $ 271,000

Salvage Value= $ 25,000

Useful Life = 4 years

Depreciation per year = ($271,000-$25000) / 4

=$246,000/4

. = $ 61,500

Year	Annual Depreciation	Year End Book Value
2017	61500	209500
2018	61500	148000
2019	61500	86500
2020	61500	25000

Exercise 10-8 Double Declining Balance Method

Now, as per the straight-line method of depreciation:

• Cost of the asset = $271,000
• Salvage Value = $ 25,000
• The useful life of the asset = 4years
• Depreciation rate = 1/useful life *100 = (1/4) * 100 = 25%

Double-declining balance formula = 2 X Cost of the asset X Depreciation rate

Here, it will be 2 x 25% = 50%

	Depreiation for the period			End of the period
Year	Beginning of the Year	Depreciation rate %	Annual Depreciation	Accumulated Depreciation	Year end Book Value
2017	271,000.0	50	135,500.0	135,500.0	135,500.0
2018	135,500.0	50	67,750.0	203,250.0	67,750.0
2019	67,750.0	50	33,875.0	237,125.0	33,875.0
2020	33,875.0	50	16,937.5	254,062.5	16,937.5
Total	508,125.0		254,062.5	829,937.5	254,062.5

Exercise 10-14

Journal Entry

Equipment Account.....Dr $17,900

To Cash A/c $17,900

( Being Cost Incurred for the Betterment of Equiment paid in Cash)