ISIT Corp baught new computer on Apri 23, 2016, it cost $600 and had useful life...

ISIT Corp baught new computer on Apri 23, 2016, it cost $600 and had useful life of 5 years with residual value of $30,000. Make deprciation scedule using the double declining balance method that contains the following and section 179 that contain the columns: year depreciation expense. Accumulated depreciation. book value.

Expert Solution

Straight line depreciation rate = 20% (100% / 5)

Therefore, under the double declining method rate will be 40% each year.

Computer cost $600 and salvage value $30 (In question it is given $30000 which cannot be)

Year	Depreciation exp	Accumulated Depreciation	Book value
2016	120.00	120.00	480.00
2017	192.00	312.00	288.00
2018	115.20	427.20	172.80
2019	69.12	496.32	103.68
2020	69.12	565.44	34.56
2021	4.56	570.00	30.00

Notes:

1. For the first year, we will use the half year convention rate and thus depreciation will be = 600 x 40% x6/12

2. for the years 2017 and 2018, depreciation will be = Book value x 40%

3. In the year 2019, since depreciation under declining method will be less than SLM, we need to shift back to SLM method. Depreciation = 172.80 / 2.5 = 69.12 and similary for year 2020 depreciation = 103.68 / 1.5

4. In the year 2021, depreciation will be 4.56 to bring the book value to $30.

PS: Pls inform if the salvage value is wrong. You can use the formula to get the answer in case of any different value from assumption.

ekkarill92 answered 1 year ago

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