Question

11-3. Office equipment whose initial cost is $100,000 has an estimated actual life of 6 years, with an estimated salvage value of $10,000. Prepare tables listing the annual costs of depreciation and the book value at the end of each 6 years, based on straight-line and MACRS depreciation.

Answer 1

Straight line depreciation:-

Depreciation expense per year = Initial cost - Salvage value Useful life

Depreciation expense per year = $100,000 - $10,000 6 years

Depreciation expense per year = $ 15,000

Straight line depreciation
Year	Annual depreciation expense	Book value of the asset
0	$0	$100,000
1	$15,000	$85,000
2	$15,000	$70,000
3	$15,000	$55,000
4	$15,000	$40,000
5	$15,000	$25,000
6	$15,000	$10,000

The book value of the asset at the end of year 6 = $ 10,000

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MACRS depreciation

Office equipment falls under 10 year class life

The book value at the end of 6 years = $ 29,490

Year	Depreciation rate	Annual depreciation expense	Book value of the asset
0	_	_	$100,000
1	10%	$10,000	$90,000
2	18%	$18,000	$72,000
3	14.40%	$14,400	$57,600
4	11.52%	$11,520	$46,080
5	9.22%	$9,220	$36,860
6	7.37%	$7,370	$29,490
7	6.55%	$6,550	$22,940
8	6.55%	$6,550	$16,390
9	6.56%	$6,560	$9,830
10	6.55%	$6,550	$3,280
11	3.28%	$3,280	$0