Question

The hospital has acquired medical diagnostic equipment that cost $2,000,000 total. In addition, the hospital had to pay $45,000 to have the equipment shipped to it from the manufacturer, and $60,000 to install the equipment. It is expected that the equipment has a 7-year useful life, and a $200,000 salvage value. Calculate the ten years of depreciation using straight line, double declining balance, and sum-of-the-years digits.

Equipment

Other Cost

Full Value

Useful Life

Salvage Value

Depreciable Base

Straight-Line1
Annual Depreciation	Accumulated Depreciation

1

2

3

4

5

6

7

Double Declining Balance 2
Annual Depreciation	Accumulated Depreciation

1

2

3

4

5

6

7

Sum-of-the-years Digits3
Annual Depreciation	Accumulated Depreciation

1

2

3

4

5

6

7

Answer 1

As per SLM Method
Year	Original Cost	Depreciable Value	Depreciation Expense	Accumulated Depreciation	Ending Book Value
1	$2,105,000	$1,905,000	$272,143	$272,143	$1,832,857
2	$2,105,000	$1,832,857	$272,143	$544,286	$1,560,714
3	$2,105,000	$1,560,714	$272,143	$816,429	$1,288,571
4	$2,105,000	$1,288,571	$272,143	$1,088,572	$1,016,428
5	$2,105,000	$1,016,428	$272,143	$1,360,715	$744,285
6	$2,105,000	$744,285	$272,143	$1,632,858	$472,142
7	$2,105,000	$472,142	$272,143	$1,905,001	$199,999
SLM=( Original Cost- Salvage Value )/ No. of Year
= (2105000-200000)/7=272143

As per double declinning method
Year	Original Cost	Beg. Book Value	Depreciation Expense	Accumulated Depreciation	Ending Book Value	Working
1	2,105,000	2,105,000	601,429	601,429	1,503,571	2105000*28.5714%
2	2,105,000	1,503,571	429,592	1,031,020	1,073,980	1503602*28.5714%
3	2,105,000	1,073,980	306,851	1,337,872	767,128	1074023*28.5714%
4	2,105,000	767,128	219,180	1,557,051	547,949	767174*28.5714%
5	2,105,000	547,949	156,557	1,713,608	391,392	547993*28.5714%
6	2,105,000	391,392	111,826	1,825,434	279,566	391431*28.5714%
7	2,105,000	279,566	79,876	1,905,310	199,690	279599*28.5714%
Rate of Depreciation :=1/7*2= 28.57%

As perSOY method
Year	Original Cost (A)	Depreciable Value (B)	Depreciation Expense (C =BXF))	Accumulated Depreciation (D)	Ending Book Value (E = A-D)	Depreciation at SYD (F)
1	$2,105,000	$1,905,000	$476,250	$476,250	$1,628,750	7/28
2	$2,105,000	$1,905,000	$408,214	$884,464	$1,220,536	6/28
3	$2,105,000	$1,905,000	$340,179	$1,224,643	$880,357	5/28
4	$2,105,000	$1,905,000	$272,143	$1,496,786	$608,214	4/28
5	$2,105,000	$1,905,000	$204,107	$1,700,893	$404,107	3/28
6	$2,105,000	$1,905,000	$136,071	$1,836,964	$268,036	2/28
7	$2,105,000	$1,905,000	$68,036	$1,905,000	$200,000	1/28