Question

A medical practice purchases computer equipment that cost $15,000 to be used for medical billing. In addition, the practice purchases billing software that cost $5,000. Both the computer equipment and the software are expected to have 3-year useful lives and no salvage value.

Please calculate the Three years of depreciation using straight-line, double declining balance, and sum-of-the-years digits.

Asset Cost:

Salvage Value:

Asset Life:

Straight-line Depreciation Each Year #DIV/0!

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

Double Declining Balance Depreciation #NUM!

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

Sum of the Years Digits 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

** Note: By the end of the third year, the DDB method must take enough depreciation in total to have accumulated depreciation equal to the
Depreciable Base. Therefore the depreciation in the last year is computed by subtracting the accumulated depreciation at the end of the
second year from the depreciable base of $20,000

Answer 1

Solution:

Cost of computer equipment & Billing software = $15,000 + $5,000 = $20,000

Life = 3 Years

Depreciation rate (Straight Line) = 1/3 = 33.33%

Depreciation rate (Double Declining Balance) = 33.3333*2 = 66.67%

Computation of Depreciaton - Straight Line
Year	Opening balance of Assets	Depreciation	Accumlated Depreciation	Closing Balance of Assets
1	$20,000.00	$6,666.67	$6,666.67	$13,333.33
2	$13,333.33	$6,666.67	$13,333.33	$6,666.67
3	$6,666.67	$6,666.67	$20,000.00	$0.00

Computation of Depreciaton - Double Declining
Year	Opening balance of Assets	Depreciation (66.67% of opening balance)	Accumlated Depreciation	Closing Balance of Assets
1	$20,000.00	$13,334.00	$13,334.00	$6,666.00
2	$6,666.00	$4,444.22	$17,778.22	$2,221.78
3	$2,221.78	$2,221.78	$20,000.00	$0.00

Computation of Depreciaton - Sum of digit of years
Year	Depreciation Base	Remaining life of asset	Depreciation fraction	Depreciation Expense	Accumlated Depreciation
1	$20,000.00	3	3/6	$10,000.00	$10,000.00
2	$20,000.00	2	2/6	$6,666.67	$16,666.67
3	$20,000.00	1	1/6	$3,333.33	$20,000.00