Question

Consider the depreciation of a %5,000 asset with $0 salvage value. Assuming a 5 year depreciable life, develop the complete depreciation schedules for the asset showing year-by-year depreciation charges and book values, using:

(a) Straight Line

(b) Sum-of-years'-digits (SOYD)

(c) Declining Balance (DB) with 20% depreciation rate, and

(d) Modified accelerated cost recovery system (MACRS) depreciation.

Be sure to include complete depreciation schedules showing year-by-year depreciation amounts, and, book values, for each problem.

Answer 1

Years	Straight Line	WDV
1	1,000.00	4,000.00
2	1,000.00	3,000.00
3	1,000.00	2,000.00
4	1,000.00	1,000.00
5	1,000.00	-
Years	Sum of Digit	Depreciation	WDV
1	5000*5/15=	1,666.67	3,333.33
2	5000*4/15=	1,333.33	2,000.00
3	5000*3/15=	1,000.00	1,000.00
4	5000*2/15=	666.67	333.33
5	5000*1/15=	333.33	-
Sum of Months	1+2+3+4+5=	15
Years	Cost	Depreciation	WDV
0	5000
1		2000	3000
2		1200	1800
3		720	1080
4		432	648
5		259.2	388.8
MACRS
Years	Cost	Depreciation %	Depreciation	WDV
0	5000
1		20%	1000	4000
2		32%	1600	2400
3		19.20%	960	1440
4		11.52%	576	864
5		11.52%	576	288
8		5.76%	288	0

Notes:

Sum of Months

1+2+3+4+5=

15

Declining Balance Method: 40% Depreciation is used

MACRS applicable percentage for property class is used for calculation