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Sum-of-Years Digits, Declining Balance Cost of Equipment: $750,000 Estimated Salvage Value: $70,000 Estimated Life (yrs): 16
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  • A. Depreciable Cost= $750000-$70000= 680000

    Sum of years digit (Life)= 1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16=136

    Sum of years digit (Yrs remaining)= 11+12+13+14+15+16= 81

    Declining balance rate= 100/16= 6.25%

    B.

    Depreciation exp

    SYD method

    DB Method

    Year 2

    75000 (750000-70000)x16/136

    43945 (703125x6.25%)

    Note: 750000-6.25%=703125

    year of sale (i.e. for year 11)

    30000 (750000-70000)x6/136

    24584 (393345x6.25%)

    At the time of sale

    SYD method

    DB method

    Accumulated Depreciation

    575000

    356655

    Book value

    175000

    393345

    C. Entry under SYD Method:

    Year 1 = Depreciation A/c. ---Dr. 80000

    to Accumulated Depreciation / fixed assets A/c. 80000

    Like the above entry ; each year depreciation entry will be done.

    Depreciation schedule for the assets(for 10 years):

    Year

    Depreciation Base

    Remaining Life of machine

    Depreciation Fraction

    Depreciation Expense

    1

    680000

    16

    16/136

    80000

    2

    680000

    15

    15/136

    75000

    3

    680000

    14

    14/136

    70000

    4

    680000

    13

    13/136

    65000

    5

    680000

    12

    12/136

    60000

    6

    680000

    11

    11/136

    55000

    7

    680000

    10

    10/136

    50000

    8

    680000

    9

    9/136

    45000

    9

    680000

    8

    8/136

    40000

    10

    680000

    7

    7/136

    35000

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