Question

Equipment costing $540,000 with an expected useful life of 10 years and an expected salvage value of $40,000, was purchased at the beginning of the year.

Calculate the depreciation expense for the first five years using:

(a) Sum-of-the-years' digits method. Do not round until final calculation. Round answers to the nearest whole number.

Year 1	$Answer
Year 2	$Answer
Year 3	$Answer
Year 4	$Answer
Year 5	$Answer

(b) Double-declining balance method (without straight-line switchover). Do not round until final calculation. Round answers to the nearest whole number.

Year 1	$Answer
Year 2	$Answer
Year 3	$Answer
Year 4	$Answer
Year 5	$Answer

Answer 1

a)	Cost	$540,000
	Salvage Value	$40,000
	Depreciable Amount=		Cost- Salvage Value
			$540000-$40000
	Depreciable Amount=		$500,000
	Useful Life		10 years
	Sum of years digit =		10+9+8+7+6+5+4+3+2+1
			$55
	Sum of years digit method
	Years	Sum of years digit (a)	Digit (b)	Depreciation ( Depreciable Amount*b/a)	Calculation
	1	55	10	$90,909.09	( 500000*10/55)
	2	55	9	$81,818.18	( 500000*9/55)
	3	55	8	$72,727.27	( 500000*8/55)
	4	55	7	$63,636.36	( 500000*7/55)
	5	55	6	$54,545.45	( 500000*6/55)
b)	Double Declinging Balance method
	Depreciation rate		100%/useful life
			100%/10
			10%
	Deprciation rate gets doubled		10%*2	20%
	Years	Book Value		Depreciation (Book Value *20%)	Calculation
	1	$540,000.00		$108,000.00	(540000*20%)
	2	$432,000.00		$86,400.00	(432000*20%)
	3	$345,600.00		$69,120.00	(345600*20%)
	4	$276,480.00		$55,296.00	(276480*20%)
	5	$221,184.00		$44,236.80	(221184*20%)