Homework Answers
Answer A1:
| Year | Depreciation Expense |
|---|---|
| 1 | $8,080 |
| 2 | $8,080 |
| 3 | $8,080 |
| 4 | $8,080 |
| 5 | $8,080 |
Explanation:
Depreciation as per SLM = (Cost - Salvage value) / Estimated assets life.
= ($47,000 - $6,600) / 5 years .
= $8,080.
Answer A2.
| Year | Depreciation Expense |
|---|---|
| 1 | $18,800 |
| 2 | $11,280 |
| 3 | $6,768 |
| 4 | $3,552 |
| 5 | $0 |
Explanation:
Depreciation as per SLM = 2 * SLM rate * Book value at beginning of the year
Where SLM rate = 1 / Estimated assets life = 1 / 5 years = 20 %
Year 1 = 2 * 20 % * $47,000 = $18,800
Year 2 = 2 * 20 % * ($47,000 - $18,800) = $11,280
Year 3 = 2 * 20 % * ($47,000 - $18,800 - $11,280 ) = $6,768
Year 4 = ($47,000 - $18,800 - $11,280 - $6,768 - $6,768 ) = $3,552 (Under DDB method depreciation cease to exist when book value = salvage value)
Year 5 = $0
Answer B.
| Depreciation Expense | |
|---|---|
| Straight line | $8,080 * 6 / 12 = $4,040 |
| Double decline balance | $18,800 * 6 / 12 = $9,400 |
Answer C.
| Cost | Accumulated Depreciation (Note 1) | Net Book Value | |
|---|---|---|---|
| Straight line | $47,000 | [$8,080 + ($8,080 * 6 / 12)] = $12,120 | ($47,000 - $12,120) = $34,880 |
| Double decline balance | $47,000 | [$18,800 + ($11,280* 6 / 12)] = $24,440 | ($47,000 - $$24,440) = $22,560 |
Note 1 : Accumulated Depreciation for December 2020 consist of
July 2 , 2019 - July 1 2020 ( ie Year 1)
July 2 , 2020 - December 31 2020 ( ie half of Year 2)
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