Question

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A company has purchased some office furniture for $100,000. The furniture has a 6 year life and salvage value of $10,000. Compute the depreciation schedule using: (Chapter 11)

-straight line depreciation

-sum of years digits

Answer 1

Straight line

Cost of furniture = $100,000

Salvage value = $10,000

Useful life = 6 years

Annual depreciation = ( Cost of furniture- Salvage value)/ Useful life

= (100,000-10,000)/6

= 90,000/6

= $15,000

Year	Book value Beginning of Year	Annual Depreciation expense	Accumulated depreciation	Book value End of Year
1	100,000	15,000	15000	85,000
2	85,000	15,000	30,000	70,000
3	70,000	15,000	45,000	55,000
4	55,000	15,000	60,000	40,000
5	40,000	15,000	75,000	25,000
5	25,000	15,000	90,000	10,000

sum of years digits

Cost of furniture = $100,000

Salvage value = $10,000

Depreciable cost = Cost of furniture - Salvage value

= 100,000-10,000

= $90,000

Sum of year = 1+2+3+4+5+6

= 21

Year	Book value Beginning of Year	Annual Depreciation expense	Accumulated depreciation	Book value End of Year
1	100,000	90,000 x 6/21 = 25,714	25714	74,286
2	74,286	90,000 x 5/21 = 21,429	47,143	52,857
3	52,857	90,000 x 4/21 = 17,143	64,286	35,714
4	35,714	90,000 x 3/21 = 12,857	77,143	22,857
5	22,857	90,000 x 2/21 = 8,571	85,714	14,286
5	14,286	90,000 x 1/21 = 4,286	90,000	10,000

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