One-year depreciation of MR machine purchased for $400,000 at the beginning of the year.

End of year adjustment – One-year depreciation of MR machine purchased for $400,000 at the beginning of the year. Cost: $400,000, Useful Life is 10 years. Calculate Straight-line and Accelerated Depreciation, Calculate The Double Declining Balance Depreciation, and Calculate The Sum of the Years Digits Depreciation.

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Expert Solution

SOLUTION:

Straight-line and Accumulated Depreciation

Depreciation expense= (Acquisition cost-Salvage value)/Useful life

STRAIGHT-LINE METHOD
Year End	Acquisition Cost	Salvage Value	Useful Life	Annual Depreciation	Accumulated Depreciation
1st	$ 400,000	0	10	years	$40,000	$ 40,000
2nd	$ 400,000	0	10	years	$40,000	(40000+40000)= 80000
3rd	$ 400,000	0	10	years	$40,000	(80000+40000)= 120000
4th	$ 400,000	0	10	years	$40,000	(120000+40000)= 160000
5th	$ 400,000	0	10	years	$40,000	(160000+40000)= 200000
6th	$ 400,000	0	10	years	$40,000	(200000+40000)=240000
7th	$ 400,000	0	10	years	$40,000	(240000+40000)= 280000
8th	$ 400,000	0	10	years	$40,000	(280000+40000)= 320000
9th	$ 400,000	0	10	years	$40,000	(320000+40000)=360000
10th	$ 400,000	0	10	years	$40,000	(360000+40000)= 400000

The Double Declining Balance Depreciation

Depreciation Rate = 10%

Double Declining Balance Rate = 10% * 2 = 20%

DOUBLE-DECLINING-BALANCE METHOD
Year	Beginning Book Value	Rate	Annual Depreciation	Accumulated Depreciation
1st	$ 400,000	20%	(400000*20%)= 80000	80000
2nd	(400000-80000)= 320000	20%	(320000*20%)= 64000	(80000+64000)= 144000
3rd	(400000-144000)= 256000	20%	(256000*20%)= 51200	(144000+51200)= 195200
4th	(400000-195200)= 204800	20%	(204800*20%)=40960	(195200+40960)=236160
5th	(400000-236160)=163840	20%	(163840*20%)=32768	(236160+32768)= 268928
6th	(400000-268928)=131072	20%	(131072*20%)=26214	(268928+262140=295142
7th	(400000-295142)=104858	20%	(104858*20%)=20972	(295142+20972)=316114
8th	(400000-316114)=83886	20%	(83886*20%)=16777	(316114+16777)=332891
9th	(400000-332891)=67109	20%	(67109*20%)=13422	(332891+13422)=346313
10th	(400000-346313)=53687	20%	(53687*20%)=10737	(346313+10737)=357050

The Sum of the Years Digits Depreciation

Sum of Years' digit= N(N+1) / 2 = 10(11) / 2 = 110/2 = 55

SUM-OF-THE-YEARS'-DIGIT METHOD
Year	Fraction	Cost Less Salvage	Annual Depreciation	Accumulated Depreciation
1st	10/55	$ 400,000	(400000*10/55)= 72727	72727
2nd	9/55	$ 400,000	(400000*9/55)= 65455	(72727+65455)= 138182
3rd	8/55	$ 400,000	(400000*8/55)= 58182	(138182+58182)= 196364
4th	7/55	$ 400,000	(400000*7/55)= 50909	(196364+50909)= 247273
5th	6/55	$ 400,000	(400000*6/55)= 43636	(247273+43636)= 290909
6th	5/55	$ 400,000	(400000*5/55)= 36364	(290909+36364)= 327273
7th	4/55	$ 400,000	(400000*4/55)= 29091	(327273+29091)= 356364
8th	3/55	$ 400,000	(400000*3/55)= 21818	(356364+21818)= 378182
9th	2/55	$ 400,000	(400000*2/55)= 14545	(378182+14545)= 392727
10th	1/55	$ 400,000	(400000*1/55)= 7273	(392727+7273)= 400000

ekkarill92 answered 2 years ago

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