Question

If the salvage value was decreased for Asset 1002, what affect would there be on depreciation expense? What affect on the Accumulated Depreciation

Small Builders, Inc. Depreciation Schedule
Asset #	1001			IF=(condition, value if true, value if false) - Cell G12
Asset	Display Cases			IF=[condition, value if true, value if false(condition, value if true, value if false)] - Cells G13-G16
Date acquired	1/1/2015		X	should switch
Cost	$        15,000.00		-	do not switch
Depreciation method	DDB
Salvage value
Estimated useful life	5
Year	Depreciation Expense	Accumulated Depreciation		Straight-Line Test	Switch*	Depreciation Expense	Accumulated Depreciation
2015	$6,000.00	$6,000.00		$3,750.00	-	6000	$6,000.00
2016	$3,600.00	$9,600.00		$2,250.00	-	3600	$9,600.00
2017	$2,160.00	$11,760.00		$1,800.00	-	2160	$11,760.00
2018	$1,296.00	$13,056.00		$1,620.00	X	1620	$13,380.00
2019	$777.60	$13,833.60		$1,944.00	X	1620	$15,000.00

Answer 1

If the salvage value for asset is decreased it will increase the depreciable amount of asset, hence it would affect both deperciation expenses for the current year as well as accumulated depreciation. Depreciation expenses will rise as well as accumulated balance of depreciation will increase.

Cost of assets acquired is $15000. Total Depreciation with useful life of 5 years & no salvage value iunder Double Declining method is $15000.

$15000/5 = $3000 each year i.e. 20% each year, but for method applied 40% will be deducted each year.

Hence, depreciation for year 1 is $6000(15000*40%), year 2 is $3600 [(15000-6000)*40%],

year 3 is $2160[(9000-3600)*40%], year 4 is $1296[(5400-2160)*40%], year 5 is $778[(3240-1296)*40%]