Question

"Exercise 11-1 Crane Company purchases equipment on January 1, Year 1, at a cost of $567,490. The asset is expected to have a service life of 12 years and a salvage value of $48,400. Compute the amount of depreciation for Years 1 through 3 using the straight-line depreciation method. (Round answer to O decimal places, e.g. 5,125.) Depreciation for Year 1 Depreciation for Year 2 Depreciation for Year 3 Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years-digits method. Depreciation for Year 1 Depreciation for Year 2 Depreciation for Year 3 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 o decimal places, e.g. 45,892.) Depreciation for Year 1 Depreciation for Year 2 Depreciation for Year 3

Answer 1

Straight Line Method Depreciation for the year 1 Depreciation for the year 2 Depreciation for the year 3 43,258 43,258 43,258 Cost of Machine Less : Salvage Value of Machine Depreciable cost of Machine Estimated Useful life 567,490 (48,400) 519,090 12 years Depreciation per year ( Straight line ) = Depreciable cost of Machine / Estimated Useful life S 519090/12 43,258 Depreciation per year ( Straight line ) = Under the Straight line method of Depreciation Depreciation is same for all the years.

Sum of the years digits method S Depreciation for the year 1 Depreciation for the year 2 Depreciation for the year 3 79,860 73,205 66,550 Cost of Machine Less : Salvage Value of Machine Depreciable cost of Machine 567,490 (48,400) 519,090 S Depreciation = Depreciable cost of asset * Remaining useful life of asset at the beginning / Sum of the years digits Sum of the years digts = 12+11+10+9+8+7+6+5+4+3+2+1 = 78 Depreciation for the year 1 = $ 519090 *12/78 79,860 Depreciation for the year 2 = $ 519090 *11/78 73,205 Depreciation for the year 3 = S 519090 *10/78 66,550

Double Declining Balance method Depreciation for the year 1 Depreciation for the year 2 Depreciation for the year 3 94,582 78,818 65,682 Year Net Book value Beginning of year Rate Accumulated Net Book value Depreciation Depreciation at the at the end of expenses end of the year year S 567,490 S 94,582S 94,582S 472,908 S 78,818 S 173,400S 394,090 s 65,682 S 239,081 328,409 567,490 472,908 394,090 16.67% 16.67% 16.67% Depreciation = Net Book value* Depreciation Rate Double Declining rate = 1/useful life x 100 x 2 1/12 x100 x2 16.67% Double Declining rate =