Question

Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of $469,000. The asset is expected to have a service life of 12 years and a salvage value of $40,000.

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

Answer 1

Answer:

to calculate depreciation using the sum-of-the-years'-digits method:

n(n+1) divided by 2 = [12(13)] / 2 = 78

depreciable value = cost - salvage value = $469,000 - $40,000 = $429,000

1. depreciation year 1 = 12/78 x $429,000 = $66,000
2. depreciation year 2 = 11/78 x $429,000 = $60,500
3. depreciation year 3 = 10/78 x $429,000 = $55,000

the formula used to calculate depreciation using the double-declining-balance method is:

2 x cost of the asset x depreciation rate

1. depreciation year 1 = 2 x $469,000 x 1/12 = $78,167
2. depreciation year 2 = 2 x ($469,000 - $78,167) x 1/12 = $65,139
3. depreciation year 3 = 2 x ($390,833 - $65,139) x 1/12 = $54,282

Answer 2

Using the sum-of-the-year digits method, the depreciation expense in:

Year 1 = $66,000

Year 2 = $60,500

Year 3 = $55,000

Using the double-declining balance method, the depreciation expense in:

Year 1 = 78,166.67

Year 2 = $65,138.89

Year 3 =  $54,282.41

Sum-of-the-year digits = (remaining useful life / sum of the years ) x  (Cost of asset - Salvage value)

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

Year 1 deprecation

(12 / 78) x ($469,000 - $40,000) = $66,000

Year 2 deprecation

(11 / 78) x ($469,000 - $40,000) = $60,500

Year 3 deprecation

(10 / 78) x ($469,000 - $40,000) = $55,000

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life)

Year 1 deprecation

2/12 x $469,000 = 78,166.67

Book value in year 2 =  $469,000 - 78,166.67 = $390,833.33

Year 2 deprecation

2/12 x $390,833.33 = $65,138.89

Book value in year 3 =$390,833.33 -  $65,138.89 = $325,694.44

Year 3 deprecation

2/12 x $325,694.44 = $54,282.41

A similar question was solved here: https://brainly.com/question/18273958