Question

On January 2, 2016, the Hanover Company purchased some office equipment for $23,000. The equipment is expected to have a useful life of five years and a salvage value of $5,000. Prepare a schedule showing the annual depreciation for each of the first three years of the asset's life under the straight-line method, the double-declining-balance method, and the sum-of-the-years'-digits method

Answer 1

Straight line method
Depreciation rate = 100%/5 years = 20%
Year	Cost	Salvage value	Dep value	Dep rate	depreciation
1	$23,000	$5,000	$18,000	20%	$3,600
2	$23,000	$5,000	$18,000	20%	$3,600
3	$23,000	$5,000	$18,000	20%	$3,600

Depreciation rate under Double declaining method = 2*straight line dep rate = 2*20% =40%
Double declining balance method
Year	Net book value beginning of year	Double-declining balance depreciation (Net book value*40%)	Net book value, end of year
1	$23,000	$9,200	$13,800	(23,000*40%) = $9,200
2	$13,800	$5,520	$8,280
3	$8,280	$3,312	$4,968

	Sum of years depreciation method
Year	Depreciation base	Remaining useful life	Depreciation fraction	Dep expense
1	$18,000	5	5/15	$6,000
2	$18,000	4	4/15	$4,800
3	$18,000	3	3/15	$3,600