Question

I vietiiuUS Chan Ltd, purchased new furniture for its store on 1 May 2013. The furniture is expected to have a year me and with 20.00e residual value. The following expenditures were associated with the purchase: Cost of the furniture $90,000 cost = 70.000+ Freight charges 5,000 1500+3 -96.400 Sales taxes 3,500 Installation of furniture 1,500 Chan Ltd adopts the cost model as its accounting policy in subsequently measuring its property, plant, and equipment. Instructions a. Compute depreciation expense for the years 2013 through 2017 under each depreciation method listed below: ( assuming the depreciation policy for partial period depreciation is by using rounded to the nearest whole month) 1. Straight-line method. 2. 200 percent declining-balance, 3. sum-of-the-year-digit method

Answer 1

Cost of the furniture	90,000
Freight Charges	5000
Sales taxes	3500
Installation of furniture	1500
Total cost of furniture	1,00,000
Residual value	20,000
Value to be depreciated	80,000	(1,00,000-20,000)
No of years	4
1) Straight Line method	80,000/4
Depreciation per year	20,000
2013	13,333	(20,000*8/12)
2014	20,000
2015	20,000
2016	20,000
2017	6667	(20,000*4/12)
2) 200% declinig balance
First divide 100% by no of years		100/4	25
Multiply 25 by 2		50
Rate of depreciation		50%	( calculated above)
2013		26666.67	(80,000*50%*8/12)
WDV at end of 2013		53,333	(80,000-26666.67)
2014		26666.67	(53,333*50%)
WDV at end of 2014		26,667	(53,333-26,667)
2015		13333.33	(26,667*50%)
WDV at end of 2015		13,333	(26,667-13,333)
2016		6666.667	(13,333*50%)
WDV at end of 2016		6,667	(13,333-6666)
2017		1111.111	(6667*50%*4/12)
3) Sum of digits method
Sum of digits would be obtained by adding 4+3+2+1				10
Rate of depreciation
ist Year	40%	(4/10)
2nd year	30%	(3/10)
3rd year	20%	(2/10)
4th year	10%	(1/10)
rate of dep
2013	26.67	(40*8/12)
2014	33.33	(40*4/12+30*8/12)
2015	23.33	(30*4/12+20*8/12)
2016	13.33	(20*4/12+10*8/12)
2017	3.33	(10*4/12)
Amount of dep
2013	21333	(80,000*26.67)
2014	26667	(80,000*33.33)
2015	18664	(80,000*23.33)
2016	10667	(80,000*13.33)
2017	2667	(80,000*3.33)