Sum-of-Years' Digits, Declining Balance Cost of Equipment: $750,000 Estimated Salvage Value: $70,000 Estimated Life (yrs): 16...

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Sum-of-Years Digits, Declining Balance Cost of Equipment: $750,000 Estimated Salvage Value: $70,000 Estimated Life (yrs): 16

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Answer 1

Answer #1

A. Depreciable Cost= $750000-$70000= 680000

Sum of years digit (Life)= 1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16=136

Sum of years digit (Yrs remaining)= 11+12+13+14+15+16= 81

Declining balance rate= 100/16= 6.25%

B.

Depreciation exp	SYD method	DB Method
Year 2	75000 (750000-70000)x16/136	43945 (703125x6.25%) Note: 750000-6.25%=703125
year of sale (i.e. for year 11)	30000 (750000-70000)x6/136	24584 (393345x6.25%)
At the time of sale	SYD method	DB method
Accumulated Depreciation	575000	356655
Book value	175000	393345

C. Entry under SYD Method:

Year 1 = Depreciation A/c. ---Dr. 80000

to Accumulated Depreciation / fixed assets A/c. 80000

Like the above entry ; each year depreciation entry will be done.

Depreciation schedule for the assets(for 10 years):

Year	Depreciation Base	Remaining Life of machine	Depreciation Fraction	Depreciation Expense
1	680000	16	16/136	80000
2	680000	15	15/136	75000
3	680000	14	14/136	70000
4	680000	13	13/136	65000
5	680000	12	12/136	60000
6	680000	11	11/136	55000
7	680000	10	10/136	50000
8	680000	9	9/136	45000
9	680000	8	8/136	40000
10	680000	7	7/136	35000

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