Question

s A company bought a machine for $4,000 that has an estimated salvace value of $1,000 at the end o -year useful life. Compute the depreciation schedule and the book value schedule using. a) Double declining balance depreciation (2 pts) 2 (4000) = 1333.3 YEAR DDB Dep 1333-3 888. a 592.6 395.06 2638 Tyth.58 D DB BV 444.43 294.3 197.53 131.66 ² (26667 ) = 888.9 2 (1777.8) = 592.6 3 (1185-2)=395.06 2 (790.14) = 263.38 2 (526-76) - 17 5.58 187. 174 58.52 b) Using SOYD method, what is the Book Value after 4 years? (2 pts) + 3 + 4+ 5+ 6 =21 di = 4 (4000-1000) = $57.4 c) Using SL method, what is the Book Value after 2 years? (2 pts) coou -1000 $1506 =

the life of the machine is 6 years

Answer 1

(a) DDB method

SLM depreciation rate = 1/Useful life = 1/6

DDB rate = 2 x SLM rate = 2 x (1/6) = 1/3

DDB depreciation schedule as follows. This method ignores salvage value.

DDB
Year	Beginning-of-year Book Value ($)	Depreciation Rate	Annual Depreciation ($)	Accumulated Depreciation ($)	End-of-Year Book Value ($)
1	4,000	1/3	1,333.33	1,333.33	2,666.67
2	2,666.67	1/3	888.89	2,222.22	1,777.78
3	1,777.78	1/3	592.59	2,814.81	1,185.19
4	1,185.19	1/3	395.06	3,209.88	790.12
5	790.12	1/3	263.37	3,473.25	526.75
6	526.75	1/3	175.58	3,648.83	351.17

(b) SOYD method

Sum-of-years-digit (SOYD) = 1 + 2 + 3 + 4 + 5 + 6 = 21

Annual depreciation in year N = (Cost - Salvage Value) x (Number of years remaining at beginning of year N / SOYD)

= (4,000 - 1,000) x (Number of years remaining at beginning of year N / 21)

= 3,000 x (Number of years remaining at beginning of year N / 21)

SOYD Depreciation schedule for 4 years as follows.

SOYD
Year	Cost Basis ($)	Depreciation Rate	Annual Depreciation ($)	Accumulated Depreciation ($)	End-of-Year Book Value ($)
1	3,000	6/21	857.14	857.14	2,142.86
2	3,000	5/21	714.29	1,571.43	1,428.57
3	3,000	4/21	571.43	2,142.86	857.14
4	3,000	3/21	428.57	2,571.43	428.57

(c) SLM method

SL annual depreciation = (Cost - Salvage value) / Useful life = (4,000 - 1,000) / 6 = 3,000 / 6 = 500

SLM accumulated depreciation in 2 years = 500 x 2 = 1,000

Book value after 2 years = Cost - SLM accumulated depreciation in 2 years = 3,000 - 1,000 = 2,000