Question

Question 10 View Policies Current Attempt in Progress Tamarisk Company purchased a new plant asset on April 1, 2020, at a cost of $759.000. It was estimated to have a service life of 20 years and a salvage value of $61,800. Tamarisk' accounting period is the calendar year. Compute the depreciation for this asset for 2020 and 2021 using the sum-of-the-years-digits method (Round answers to decimal places, e.g. 45,892.) Depreciation for 2020 $ Depreciation for 2021 $ e Textbook and Media Compute the depreciation for this asset for 2020 and 2021 using the double-declining-balance method. (Round answers to decimal places, eg. 45,892) Depreciation for 2020 $ Depreciation for 2021 $ e Textbook and Media

Answer 1

1. Compute the depreciation for this asset for 2020 using sum of the years digits method as follows: No. of years of asset's life x (Cost - Salvage value) Annual depreciati on Sum of the years of assets life 20 x ($ 759,000 - $ 61,800) 210 $ 66,400 Depreciation for 2020 calendar year is $ 66,400 x 9/12 months =$ 49,800 Working note: Calculate sum of the years as follows: No. of years left in assets life x(No. of years left in assets life +1) Sum of the years 2 20x (20+1) 2 = 210 Hence, sum of the years is 210 2. Compute the depreciation for this asset for 2021 using sum of the years digits method as follows: No. of years of asset's life x (Cost - Salvage value) Annual depreciati on Sum of the years of assets life 19 x ($ 759,000 - $ 61,800) 210 = $ 63,080 Depreciation for 2021 calendar year is $ 63,080

3. Compute the depreciation for this asset for 2020 using double declining method as follows: Depreciati on for 2020 = Book value x Rate × Period %3D = $ 759,000 x 10% x months 12 = S 56,925 Hence, depreciation for this asset for 2020 using double declining method is $ 56,925 Working notes: a. Calculate annual depreciation under straight line method as follows: Cost - Salvage Value Annual depreciati on under straight line method = Life S 759,000 - S 61,800 20 = $ 34,860 Hence, annual depreciation under straight line method is $ 34,860 b. Calculate annual depreciation rate under double decline method as follows: Depreciation under SLM Method -x100 Depreciati on rate under double dedine method = 2 x Cost of the asset $34, 860 x100 %3D $759, 000 10% %3D Hence, annual depreciation rate under double decline method is 10% 4. Compute the depreciation for this asset for 2021 using double declining method as follows: Depreciati on for 2021 = Book value x Rate x Period = ($ 759,000 - S 56,925) x 10% x1 = $ 70,208 Hence, depreciation for this asset for 2021 using double declining method is $ 70,208

Sum of the year digits method: Depreciation for 2020 calendar year is S 49,800 Depreciation for 2021 calendar year is S 63,080 Double declining method: Depreciation for 2020 calendar year is S 56,925 Depreciation for 2021 calendar year is S 70, 20s