Homework Answers
STRAIGHT LINE METHOD
| YEAR | DEPRECIABLE COST | ANNUAL EXPENSE | ACCCUMULATED DEPRECIATION | BOOK VALUE |
| 2020 | 51000 | 10200 | 10200 | 44800 |
| 2021 | 51000 | 10200 | 20400 | 34600 |
| 2022 | 51000 | 10200 | 30600 | 24400 |
| 2023 | 51000 | 10200 | 40800 | 14200 |
| 2024 | 51000 | 10200 | 51000 | 4000 |
Depreciable cost = Aquisitioon Cost - Residual Value
= 55000 - 4000 = 51000
Annual Depreciation Expense = Depreciable cost / Estimated Useful life
= 51000 / 5 = 10200
Book Value = Depreciable cost - Accumulated Depreciation
= 51000 - 10200 = 44800
DOUBLE DECLINING METHOD
| YEAR | DEPRECIABLE COST | ANNUAL EXPENSE | ACCCUMULATED DEPRECIATION | BOOK VALUE |
| 2020 | 55000 | 22000 | 22000 | 33000 |
| 2021 | 33000 | 13200 | 35200 | 19800 |
| 2022 | 19800 | 7920 | 43120 | 11880 |
| 2023 | 11880 | 4752 | 47872 | 7128 |
| 2024 | 7128 | 2851.2 | 50723.2 | 4276.8 |
Under Double Declining Method residual will not be deducted from acquisition cost to get the depreciable cost. Here acquisition cost itself is the Depreciable cost for the 1st year. For the upcoming years book value will be the depreciable cost. Each year's depreciation expense will be deducted from it's depreciable cost in the same year to get that year's book value and the next year's depreciable cost.
Annual Depreciatiion expense = Aquisition cost * Double declining rate
Double declining rate = Straightline percentage * 2
Straightline percentage = 1 / Estimated usefull life
= 1 / 5 = 0.2
Double declining rate = 0.2 * 2 = 0.4
1st year depreciation = 55000 * 0.4 = 22000
book value = 55000 - 22000 = 33000
2nd year depreciation = 33000 * 0.4 = 13200
book value = 33000 - 13200 = 19800
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