Question

. Some special handling devices can be obtained for $12,000. At the end of 4 years, they can be sold for $750. Compute the depreciation schedule for the devices using the following methods:

a. Straight-line Depreciation

b. Double Declining Balance

Answer 1

a.	Depreciation Schedule under Straight-Line depreciation
	Year	Cost	Depreciation Expense			Accumulated depreciation Expense				Ending Book Value
		a	b				c			d=a-c
	1	$       12,000	$ 2,812.50				$   2,812.50			$ 9,187.50
	2	$       12,000	$ 2,812.50				$   5,625.00			$ 6,375.00
	3	$       12,000	$ 2,812.50				$   8,437.50			$ 3,562.50
	4	$       12,000	$ 2,812.50				$ 11,250.00			$     750.00
	Total
	Working:
	Straight- Line depreciation			=	(Cost - Salvage Value)/Useful Life
				=	(12000-750)/4
				=	$ 2,812.50
b.	Depreciation Schedule under double declining depreciation method:
	Year	Beginning Book Value			Depreciation Expense			Ending Book Value
			a		b=a*50%			c=a-b
	1		$     12,000		$       6,000			$    6,000
	2		$       6,000		$       3,000			$    3,000
	3		$       3,000		$       1,500			$    1,500
	4		$       1,500		$           750			$        750
	Total
	Working;
	Straight line depreciation rate			=	1/4	=	25%
	Double declining rate			=	2*25%	=	50%