Question

1. Computer equipment was acquired at the beginning of year-1 at a cost of $67,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years (20 points) a. Determine the 1st and 2nd year's depreciation expense, and accounts balances reported in balance sheets using the straight-line method (10 points). Depreciation Expense: Year 1: Year 2: _ Account Balances reported in Balance Sheet Balance Sheets 12/31/Yr 1 12/31/Yr 2 Equipment Accumulated Depreciation Net Book Value of Equipment b. Determine the 1st and 2nd year's depreciation expense, and accounts balances reported in the balance sheets using double-declining-balance method. (10 points) Depreciation Expense: Year 1: Year 2: Account Balances reported in Balance Sheet Balance Sheets 12/31/Yr 1 12/31/Yr 2 Equipment Accumulated Depreciation Net Book Value of Equipment

Answer 1

1) Calculate following : Straight line

Depreciation expense year 1 = (67000-9000)/5 = 11600

Depreciation expense year 2 = 11600

balance sheet	12/31 Yr 1	12/31 Yr 2
Equipment	67000	67000
Accumulated depreciation	-11600	-23200
Net book value of equipment	55400	43800

2) Calculate following : Double decline

Depreciation expense year 1 = 67000*40% = 26800

Depreciation expense year 2 = 67000*60%*40% = 16080

balance sheet	12/31 Yr 1	12/31 Yr 2
Equipment	67000	67000
Accumulated depreciation	-26800	-42880
Net book value of equipment	40200	24120