Question

Alice and Zain Winter are continuing to review business practices. Currently, they are reviewing the company's property, plant, and equipment and have gathered the following information: Click the icon to view the information.) Read the requirements Requirement 1. Calculate the amount of monthly depreciation expense for the computer and office furniture for 2019. (Calculate a full month's depreciation. It is not necessary to prorate depreciation based on the number of days in service.) Year 1 - Monthly Depreciation Expense Asset Computer Office Furniture Acquisition ition Date Mar. 2. 2019 Mar. 3. 2019 Cost 2,700 3,700 Estimated Residual Value 1.300 1.600 Estimated Life 6 years 7 years Depreciation Method DDB SL

Answer 1

Solution:

Asset	Acquisition Date	Cost	Estimated Life	Estimated Residual Value	Depreciation Method	Year 1- Monthly Depreciation Expense
Computer	Mar 2, 2019	2,700	6 years	1,300	DDB	$75
Office Furniture	Mar 3, 2019	3,700	7 Years	1,600	SL	$25

Double declining balance method:

Monthly depreciation expense = 2*Depreciation rate *Book value of an asset / 12 (no of months in a year)

Depreciation rate           = 100 / useful no. of years

                                                = 100 / 6

                                                = 16.67 %

Monthly depreciation expense = 2*16.67% * 2700 / 12

                                                            = $ 900 /12

                                                            = $75

In double declining balance method monthly expenses differ because the book value of an asset is going to change every month. In this method, depreciation expenses will gradually reduce over the years.

Straight line method of depreciation:

Monthly depreciation expense = (Cost of an asset – Estimated Residual value) / Estimated life in months

                                                = (3700 - 1600) / (7*12)

                                                = $25

In straight line method of depreciation all months will have same depreciation expense.