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Exercise 8-9A Computing and recording straight-line versus double-declining-balance depreciation LO 8-2, 8-3 At the beginning of...

Exercise 8-9A Computing and recording straight-line versus double-declining-balance depreciation LO 8-2, 8-3

At the beginning of Year 1, Copland Drugstore purchased a new computer system for 85,000. It is expected to have a five-year life and a $15,000 salvage value.

Required
a. Compute the depreciation for each of the five years, assuming that the company uses

(1) Straight-line depreciation. (I had 7000 as the answer but it is incorrect)

2) Double-declining-balance depreciation. (Year 4 and 5 I have incorrect)

Double-Declining
Year 1 $34,000selected answer correct
Year 2 $20,400selected answer correct
Year 3 $12,240selected answer correct
Year 4 $7,344selected answer incorrect
Year 5 $4,406selected answer incorrect

Solutions

Expert Solution

Computer cost 85000
5 year life
Salvage Value 15000
1 SLM
Dep = (Cost-Salvage value)/Useful life
= (85000-15000)/5
= 14000
Therefore, per year depreciation is 14000
2 Double declining bal
SLM perecentage 20 (85000/5)/85000*100
Double rate 40
Caln
Dep Year1 34000 (85000*.4)
Dep Year2 20400 (85000-34000)*0.4
Dep Year3 12240 (85000-34000-20400)*0.4
Dep Year4 3360 (85000-34000-20400-12240)*0.4 or [85000-15000-34000-20400-12240] whichever is lower
Dep Year5 0
70000

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ekkarill92 answered 1 year ago
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