Question

Problem 7-71B (Algorithmic)
Depreciation Schedules

Dunn Corporation acquired a new depreciable asset for $142,000. The asset has a 5-year expected life and a residual value of zero.

Required:

1. Prepare a depreciation schedule for all 5 years of the asset's expected life using the straight-line depreciation method. If an amount is zero, enter "0".

Dunn Corporation
Straight-Line Depreciation Method
Five Years
End of Year	Depreciation Expense	Accumulated Depreciation	Book Value
			$
Year 1	$	$
Year 2
Year 3
Year 4
Year 5

2. Prepare a depreciation schedule for all 5 years of the asset's expected life using the double-declining-balance depreciation method. Round all answers to the nearest dollar. If an amount is zero, enter "0".

Dunn Corporation
Double-Declining-Balance Depreciation Method
Five Years
End of Year	Depreciation Expense	Accumulated Depreciation	Book Value
Year 1
Year 2
Year 3
Year 4
Year 5

Answer 1

Solution

Dunn Corporation
Straight-Line Depreciation Method
Five Years
End of Year	Depreciation Expense	Accumulated Depreciation	Book Value
			$     142,000
Year 1	$       28,400	$           28,400	$     113,600
Year 2	$       28,400	$           56,800	$       85,200
Year 3	$       28,400	$           85,200	$       56,800
Year 4	$       28,400	$         113,600	$       28,400
Year 5	$       28,400	$         142,000	$              -

.

Dunn Corporation
Double-Declining-Balance Depreciation Method
Five Years
End of Year	Depreciation Expense	Accumulated Depreciation	Book Value
			$     142,000
Year 1	$       56,800	$           56,800	$       85,200
Year 2	$       34,080	$           90,880	$       51,120
Year 3	$       20,448	$         111,328	$       30,672
Year 4	$       12,269	$         123,597	$       18,403
Year 5	$       18,403	$         142,000	$              -

Working

Straight line Method
A	Cost	$ 142,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 142,000
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$ 28,400

.

Double declining Method
A	Cost	$ 142,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 142,000
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$ 28,400
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 142,000	40.00%	$ 56,800	$ 56,800	$ 85,200
2	$ 85,200	40.00%	$ 34,080	$ 90,880	$ 51,120
3	$ 51,120	40.00%	$ 20,448	$ 111,328	$ 30,672
4	$ 30,672	40.00%	$ 12,269	$ 123,597	$ 18,403
5	$ 18,403	40.00%	$ 18,403*	$ 142,000	$ 0

*In year 5 depreciation is not 40% instead it is adjusted to make ending book value equal to zero.