Ans :
Depreciation under SLM method:
Depreciation expense = (C-S) / L
C = Cost of the asset = $ 40,800,000.
S = Salvage value = $ 6,120,000.
L = Life of the asset = 20 years
Substitute all the above data in the formula.
Depreciation expense = (C-S) / L
Annual Depreciation expense = ($ 40,800,000 - $ 6,120,000) / 20
= $ 34,680,000 / 20
= $ 1,734,000
Book value = Cost - accumulated depreciation
= $ 40,800,000 - $ 1,734,000
= $ 39,066,000.
(2) Depreciation under double declining method,
Depreciation expense = (C) / L *2
C = Cost of the asset = $ 40,800,000
L = Life of the asset = 20 years
Depreciation expense = $ 40,800,000 / 20 * 2 = $ 4.080,000
Accumulated depreciation = $ 4.080,000
Book value = Cost - Accumulated depreciation
= $ 40,800,000 - $ 4,080,000
= $ 36,720,000
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