Question

Computer equipment was acquired at the beginning of the year at a cost of $83,000 that has an estimated residual value of $3,000 and an estimated useful life of 5 years. (15 points) Determine the: a. What is the straight line rate percent? b. What is double-declining-balance rate percent? c. What is the depreciation expense for year 3? d. What is the book value at year 3? e. Journalize the depreciation for year 3.

Answer 1

83000 3000 Fair value of equipment Residual value Useful Life Deprecition per year Per year Depreciation rate percent 5 years 16000 =(83000-3000)/5 20% =16000/80000*100 The straight line depreciation rate is 20%. Therefore, the double-declining balance rate would be 40%. c&d Year Book value Depreciation Accumulated (beginning of expense deprecition Book value (end of year) @40% end of year) year) 1 $ 83,000.00 $ 33,200.00 $ 33,200.00 $ 49,800.00 2 $ 49,800.00 $ 19,920.00 $ 53,120.00 $ 29,880.00 3 $ 29,880.00 $ 11,952.00 $ 65,072.00 $ 17,928.00 4 $ 17,928.00 $ 7,171.20 $ 72,243.20 $ 10,756.80 5 $ 10,756.80 $ 4,302.72 $ 76,545.92 $ 6,454.08