Question

5. The Hilton Company purchased equipment for $250,000 on September 1, 2017. The equipment has an estimated service life of 6 years and an estimated residual value of $10,000.

Compute the depreciation expense for 2017 and 2018 using each of the following methods:

(Record answers to two decimal points)

straight line: 2017:

2018:

sum of the years digits: 2017:

2018:

Double declining Balance: 2017:

2018:

Answer 1

1)	Straight Line Method
	Cost			$ 250,000.00
	Life			6	years
	Residual Value			$   10,000.00
	Depreciation Expense per year =			($ 250000 - $ 10000) / 6 years
			=	$   40,000.00

Depreciation Expense for :
Year	Amount
2017	$ 13,333.33	($ 40000 x 4/12)
2018	$ 40,000.00

2)	Sum of years =		1+2+3+4+5+6
		=	21
	Depreciation Expense =			(Remaining useful life / Sum of the years digit) x Depreciable Base
	Depreciable base =		$ 250000 - $ 10000
		=	$ 240,000.00

		Remaining	Dep.	Dep.
Year	Base	Life	Fraction	Expense
2017	$ 240,000.00	6	6/21'	22857.14	($ 240000 x 6/21 x 4/12)
2018	240000	5	5/21'	64761.90	[($ 240000 x 6/21 x 8/12) + ($ 240000 x 5/21 x 4/12)]

3)	Depreciation Rate =		(100% / 6 years) x 2
		=	33.33%

Year	Depreciation
2017	$ 27,777.75	($ 250000 x 33.33% x 4/12)
2018	$ 74,074.01	[($ 250000 - $ 27777.75) x 33.33%]