Question

The Mardova Clinic purchased a new surgical laser for $72,000 on January 1, 2020. The estimated salvage value is $8,000. The laser has a useful life of four years and the clinic expects to use it 8,000 hours. It was used 2,600 hours in year 1; 2,400 hours in year 2; 2,200 hours in year 3; and 2,000 hours in year 4.

Compute the annual depreciation expense, accumulated depreciation, and book value for each of the four years under each of the following four methods and answer the questions in the response template below:

A) Straight-line  

B) Units of Activity  

C) 150% Declining Balance

D) Sum of the Years Digits

A) Straight-line  

1) Year 1 - Depreciation expense $

2) Year 2 - Accumulated depreciation $

3) Year 3 - Book value $

4) Year 4 - Depreciation expense $

B) Units of Activity  

5) Year 1 - Depreciation expense $

6) Year 2 - Accumulated depreciation $

7) Year 3 - Book value $

8) Year 4 - Depreciation expense $

C) 150% Declining Balance

9) Year 1 - Depreciation expense $

10) Year 2 - Accumulated depreciation $

11) Year 3 - Book value $

12) Year 4 - Depreciation expense $

D) Sum of the Years Digits

13) Year 1 - Depreciation expense $

14) Year 2 - Accumulated depreciation $

15) Year 3 - Book value $

16) Year 4 - Depreciation expense $

Answer 1

Answer A

1)-Year 1- Depreciation Expense= $16000

2)- Year 2-Accumulated Depreciation= $32000

3)- Year 3=Book Value= $24000

4)-Year 4- Depreciation Expense= $16000

Workings

Year	Deprciation Expense	Accumulated Dep.	Book Value
1	72000-8000/4=16000	16000	56000
2	72000-8000/4=16000	32000	40000
3	72000-8000/4=16000	48000	24000
4	72000-8000/4=16000	64000	8000

Answer B

5)-Year 1- Depreciation Expense= $20800

6)- Year 2-Accumulated Depreciation= $40000

7)- Year 3=Book Value= $14400

8)-Year 4- Depreciation Expense= $6400

Workings

Year	Deprciation Expense	Accumulated Dep.	Book Value
1	2600*8=20800	20800	51200
2	2400*8=19200	40000	32000
3	2200*8=17600	57600	14400
4	6400	64000	8000

Depreciation Per Hour=72000-8000/8000=8

Year 4 = 14400-8000=6400

last year depreciation could not be 2000*8=16000 because we need Year 4 value 8000  

Answer C

9)-Year 1- Depreciation Expense= $27000

10)- Year 2-Accumulated Depreciation= $43875

11)- Year 3=Book Value= $17578.125

12)-Year 4- Depreciation Expense= $9578.125

Workings

Year	Beg. BV	Rate	Depreciation Expense	Accumlated Dep,	Ending BV
1	72000	37.5%	27000	27000	45000
2	45000	37.5%	16875	43875	28125
3	28125	37.5%	10546.875	54421.875	17578.125
4	17578.125		9578.125	64000	8000

RATE=100/4*150%=37.5%

4th Year Depreciation will be balance of Beg. BV and Salvage Value

Answer D

13)-Year 1- Depreciation Expense= $25600

14)- Year 2-Accumulated Depreciation= $44800

15)- Year 3=Book Value= $14400

16)-Year 4- Depreciation Expense= $6400

Workings

Year	Year of digit	Depreciation Expense	Accumulated Depreciation	Book Value
1	4	72000-8000*4/10=25600	25600	46400
2	3	72000-8000*3/10=19200	44800	27200
3	2	72000-8000*2/10=12800	57600	14400
4	1	72000-8000*1/10=6400	64000	8000
	10