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1) Cost of asset = $880000, Residual Value = $370000, Useful Life = 20 years.
Amount of depreciation to be charged every year = (Cost-Residual value)/Useful life
= (880000-370000)/20
= $25,500
2)
2) Double Declining Balance | |||||
Straight Line Depreciation percent | 100% in 20 years | ||||
or, | 5 % per year | ||||
Depreciation rate (%) | 2*5% = | 10 % per year | |||
Depreciation for the year 2017 | = | 10% of B.V at beginning of the year | |||
= | 10% of 880000 | ||||
= | $ 88000 | ||||
Depreciation for the year 2018 | = | 10%*(880000-Accumulated depreciation) | |||
= | 10%*(888000-88000) | ||||
= | $ 79200 |
3)For the straight-line method, under ASPE, depreciation expense is the higher of two amounts: (i) cost less salvage value over the life of the asset, and (ii) cost less residual value over the asset’s useful life.
(i)Cost = 880000, Salvage Value = Nil, Physical Life = 30 years,
Depreciation = (880,000-0)/30
= $ 29,333
(ii)Cost = 880000, Residual Value = 370000, Physical Life = 20 years,
Depreciation = (880,000-370000)20
= $ 25500
Since, depreciation calculated under method (i) is higher, it'd be the amount of depreciation for the year 2017 and 2018.
4)Under straight line method, depreciation for the 3 components for 2 years would be:
Component 1 | Cost | $ 365000 | ||
Useful Life | 25 years | |||
Residual value | $ 100000 | |||
Depreciation | = | (365000-100000)/25 | ||
= | $ 10600 | |||
For 2017 | = | $ 10600 | ||
For 2018 | = | $ 10600 |
Component 2 | Cost | $ 234000 | ||
Useful Life | 20 years | |||
Residual value | $ 102000 | |||
Depreciation | = | (234000-102000)/20 | ||
= | $ 6600 | |||
For 2017 | = | $ 6600 | ||
For 2018 | = | $ 6600 |
Component 3 | Cost | $ 281000 | ||
Useful Life | 30 years | |||
Residual value | $ 168000 | |||
Depreciation | = | (281000-168000)/30 | ||
= | $ 3766.667 | |||
For 2017 | = | $ 3767 | ||
For 2018 | = | $ 3767 |
Sheffield Corporation purchased a new plant asset on April 1, 2017, at a cost of $880,000. It was...
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