On January 3, 20X1Joe Rockhead, Co. purchased a piece of equipment for $400,000 with a service...
On January 3, 20X1Joe Rockhead, Co. purchased a piece of equipment for $400,000 with a service life of 5 years and a salvage value of $40,000.
Required: Prepare a depreciation schedule for each of the five years under each following assumptions:
(a) straight-line method, and (b) declining balance method at twice the straight-line rate (Double declining balance).
Homework Answers
(a) straight-line method,
| Year | Depreciation expense | Accumlated depreciation | Book value at the end of year |
| 20X1 | 72000 | 72000 | 328000 |
| 20X2 | 72000 | 144000 | 256000 |
| 20X3 | 72000 | 216000 | 184000 |
| 20X4 | 72000 | 288000 | 112000 |
| 20X5 | 72000 | 360000 | 40000 |
| Total | 360000 |
(b) Double decline method,
Straight line rate = 100/5 = 20%
Double decline rate = 20*2=40%
| Year | Depreciation expense | Accumlated depreciation | Book value at the end of year |
| 20X1 | 160000 | 160000 | 240000 |
| 20X2 | 96000 | 256000 | 144000 |
| 20X3 | 57600 | 313600 | 86400 |
| 20X4 | 34560 | 348160 | 51840 |
| 20X5 | 11840 | 360000 | 40000 |
| Total | 360000 |
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