Question

tamarisk Company purchases equipment on January 1, Year 1, at a cost of $564,000. The asset is expected to have a service life of 12 years and a salvage value of $50,760.

Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method. (Round answers to 0 decimal places, e.g. 5,125.)

Depreciation for Year 1		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 2		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 3		$enter a dollar amount rounded to 0 decimal places

eTextbook and Media

Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years'-digits method.

Depreciation for Year 1		$enter a dollar amount
Depreciation for Year 2		$enter a dollar amount
Depreciation for Year 3		$enter a dollar amount

eTextbook and Media

Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (Round depreciation rate to 2 decimal places, e.g. 15.84%. Round answers to 0 decimal places, e.g. 45,892.)

Depreciation for Year 1		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 2		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 3		$enter a dollar amount rounded to 0 decimal places

Answer 1

Under Straight line method

Depreciation expense= (Original cost-Salvage value)/Expected useful life of years

= ($564000-50760)/12

= $42770 per year

Depreciation for Year 1		$42770
Depreciation for Year 2		$42770
Depreciation for Year 3		$42770

Under sum-of-the-years'-digits method

Sum-of-the-years-digit= 12+11+10+9+8+7+6+5+4+3+2+1= 78

Depreciation expense= (Original cost-Salvage value)*Remaining useful life of asset/Sum-of-the-years-digit

Depreciation expense for Year 1= ($564000-50760)*12/78= $78960

Depreciation expense for Year 2= ($564000-50760)*11/78= $72380

Depreciation expense for Year 3= ($564000-50760)*10/78= $65800

Depreciation for Year 1		$78960
Depreciation for Year 2		$72380
Depreciation for Year 3		$65800

Under Double-declining-balance method

Depreciation rate= 100/12*2= 16.67%

Year	Depreciation Rate	Depreciation Expense	Book Value at the end of the Year
Year 1	16.67%	(564000*16.67%)= 94019	(564000-94019)= 469981
Year 2	16.67%	(469981*16.67%)= 78346	(469981-78346)= 391635
Year 3	16.67%	(391635*16.67%)= 65286	(391635-65286)= 326349

Depreciation for Year 1		$94019
Depreciation for Year 2		$78346
Depreciation for Year 3		$65286