Becker Office Service purchased a new computer system on January 1, 2018, for $31,900. It is...

Becker Office Service purchased a new computer system on January 1, 2018, for $31,900. It is expected to have a five-year useful life and a $3,700 salvage value. Becker Office Service expects to use the computer system more extensively in the early years of its life.

Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. (Enter all amounts as positive values. Do not round intermediate calculations. Round "SL rate" answers to 2 decimal places. Round your answers to the nearest dollar amount.)

Assume that Becker Office Service sold the computer system at the end of the fourth year for $18,000. Compute the amount of gain or loss using each depreciation method. (Negative amounts should be indicated with a minus sign. Do not round intermediate calculations. Round the final answers to nearest dollar amount.)

Expert Solution

Double Declining Method

Year	Opening book Value	Depriciation	Closing Value
Year 1	31,900	12,760	19,140
Year 2	19,140	7,656	11,484
Year 3	11,484	4,594	6,890
Year 4	6,890	2,756	4,134
Year 5	4,134	434	3,700

Formula
Declining Balance rate		Double of Straight rate on closing Value

Use full Life	5 year

SL rate	1/5	20%
Declining Balance rate	20%*2	40%


Straight Rate

Year	Opening book Value	Depriciation	Closing Value
Year 1	31,900	5,640	26,260
Year 2	26,260	5,640	20,620
Year 3	20,620	5,640	14,980
Year 4	14,980	5,640	9,340
Year 5	9,340	5,640	3,700

Yearly Depriciation	(31900-3700)/5		5640


If Sold on 4th Year

Double Declining Method
Book Value at end of 4th Year		$4,134.24
Sale Value		$18,000.00
Profit		$13,865.76


Straight Line Method
Book Value at end of 4th Year		$9,340.00
Sale Value		$18,000.00
Profit		$8,660.00

ekkarill92 answered 1 year ago

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