Question

Exercise 11-01 Waterway Company purchases equipment on January 1, Year 1, at a cost of $582,000. The asset is expected to have a service life of 12 years and a salvage value of $52,380. Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method. Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years'-digits method. Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method.

Answer 1

Ans:

1)
Annual Depreciation = (Cost Of The Asstes- Salvage Value)/ Life Of The Asset
= $582000-52380/12 years
= $44135 per year
Year	Depreciation Expenses
1	$ 44,135
2	$ 44,135
3	$ 44,135

2)	Sum of digit method
Depreciable amount = $582000-52380 =$529620
Year	sum of digit	Deprecition
a	b	c=529620*b/78
1	12	$ 81,480
2	11	$ 74,690
3	10	$ 67,900
78=12+11+10+9+8+7+6+5+4+3+2+1

3)
Double Declining Balance Method
Useful Life		12	Years
Cost		$            5,82,000
Residual Value	$ 52,380
Depreciable Value	$            5,29,620
Depreciation Rate	16.67%
Year	Depreciation Expenses	Acc Depreciation	Book Value End Of Year
1	$ 97,019	$ 97,019	$                            4,84,981
2	$ 80,846	$            1,77,866	$                            4,04,134
3	$ 67,369	$            2,45,235	$                            3,36,765

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