Please Solve the following problem A Hospital just acquired new equipment. The equipment cost $4,250,000 and...

Please Solve the following problem

A Hospital just acquired new equipment. The equipment cost $4,250,000 and
the organization spent $135,000 on upgrading the physical plant where the equipment
will be located. The equipment is expected to have a 10-year useful life and a salvage
value of 10% ($425,000), Calculate the first five years of depreciation using
straight line, double declining balance, and sum-of-the-years digits.

Please show solutions to the following
below.

	Asset Cost:
	Salvage Value:
	Asset Life:

	Straight-line Depreciation Each Year		#DIV/0!

	Asset Cost:	$0		Asset Cost:	$0
	Salvage Value:	$0		Salvage Value:	$0
	Asset Life:	0		Asset Life:	0
	Depreciation Year			Depreciation Year

	Sum of the Years Digits Depreciation		#NUM!	Double Declining Balance Depreciation		#NUM!





		Straight Line		Double Declining Balance			Sum-of-the years Digits
		Annual	Accumulated	Annual	Accumulated		Annual	Accumulated
	Year	Depreciation	Depreciation	Depreciation	Depreciation		Depreciation	Depreciation
	1		$0		$0			$0
	2		$0		$0			$0
	3		$0		$0			$0
	4		$0		$0			$0
	5		$0		$0			$0

Expert Solution

The Depreciation formulas for three methods are:

Straight line method: (Cost of the asset - Salvage Value) / Useful life of asset

Double depreciation method: Straight line depreciation x 2

Sum of years digits method: (Cost of asset - Salvage value) x Remaining useful life/Sum of useful years.

Cost of the asset: Cost of asset includes purchase price including the cost of installation.

So the cost of asset = $4250000 + $135000 = $4385000

Straight line method: (4385000 - 425000) / 10 = $396000

Double decline depreciation = Straight line method depreciation x 2 = $396000x2 = $792000

Year	Straight line method depreciation	Accumulated depreciation	Double depreciation method	Accumulated depreciation	Sum of years digits method	Accumulated depreciation
1	$396000	$396000	$792000	$792000	3960000x10/55=$720000	$720000
2	$396000	$792000	$792000	$1584000	$3960000x9/55=$648000	$1368000
3	$396000	$1188000	$792000	$2376000	$3960000x8/55=$576000	$1944000
4	$396000	$1584000	$792000	$3168000	$3960000x7/55=$504000	$2448000
5	$396000	$1980000	$792000	$3960000	$3960000x6/55=$432000	$2880000

PS: Please use "Thums Up" if you are contented with my solution and presentation.

ekkarill92 answered 2 years ago

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