Question

Exercise 11-3 Buffalo Company purchased a new plant asset on April 1, 2017, at a cost of $867,420. It was estimated to have a service life of 20 years and a salvage value of $73,200. Buffalo's accounting period is the calendar year. x] Your answer is incorrect. Try again. Compute the depreciation for this asset for 2017 and 2018 using the sum-of-the-years'-digits method. (Round answers to 0 decimal places, e.g. 45,892.) Depreciation for 2017 ne pr . Depreciation for 2018 LINK TO TEXT x] Your answer is incorrect. Try again. Compute the depreciation for this asset for 2017 and 2018 using the double-declining-balance method. (Round answers to 0 decimal places, e.g. 45,892.) Depreciation for 2017 * Depreciation for 2018

Answer 1

Solution

Straight line method

	Depreciation expense
Depreciation for 2017	$ 29,783*
Depreciation for 2018	$ 39,711

*39711/12 x 9

Double declining method

	Depreciation expense
Depreciation for 2017	$ 65,057
Depreciation for 2018	$ 80,236

Working

Straight line Method
A	Cost	$ 867,420
B	Residual Value	$ 73,200
C=A - B	Depreciable base	$ 794,220
D	Life [in years left ]	20
E=C/D	Annual SLM depreciation	$ 39,711

.

Double declining Method
A	Cost	$ 867,420
B	Residual Value	$ 73,200
C=A - B	Depreciable base	$ 794,220
D	Life [in years]	20
E=C/D	Annual SLM depreciation	$ 39,711
F=E/C	SLM Rate	5.00%
G=F x 2	DDB Rate	10.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2017	$ 867,420	10.00%	$ 65,057	$ 65,057	$ 802,364
2018	$ 802,364	10.00%	$ 80,236	$ 145,293	$ 722,127