Homework Answers
Correct Option is C ($ 190000 and $ 320000).
Note 1 : Calculation of Depreciation using Straight Line Method:
| Cost of Equipment | 450000 | |
| Installation charges | 50000 | |
| Total Cost of equipment | 500000 | |
| Less - Salvage value | 25000 | |
| Net Cost of Equipment | 475000 | |
Depreciation by Straight line method = Cost of Equipment - Salvage Value / Life of Equipment
= (500000 - 25000)/ 5
= $ 95000 Depreciation per year
Depreciation of 2 years (for 2013 and 2014) = 95000 * 2 = $ 1,90,000
Note 2: Calculation of Depreciation using Double Declining Balance Method:
Depreciation = (1/Life of Equipment)*2*Book Value of Equipment
Book Value = 450000 + 50000 = 5,00,000
Depreciation for the year 2013 = 1/5*2*500000 = $ 200000
Depreciation for the year 2014 = 1/5*2*300000 (500000-200000) = $120000
(Book value for 2014 is calculated after reducing the Depreciation for the year 2013)
Total Depreciation for the year 2013 and 2014 = 200000 + 120000 = $ 3,20,000
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