Question

A consortium of international telecommunication companies contracted for the purchase and installation of a fiber optic cable linking two major cities at a total cost of US$960 million. This amount includes freight and installation charges estimated at 10% of the above contract price. If the cable shall be depreciated over a period of 15 years with zero salvage value:

a) What is the depreciation charge during the 8th year using the sum-of-the-years digit method. Use the formula and table.

Answer 1

Please find the attached sheets for detailed answer,

Please comment for any explanatin,

Summary-

Under this method of depreciation,the company shall depreciate its asset in accelrated manner,Wher in the initial year depreciation charged shall be higher and in later year, it will become lower.

Under this method depreciable cost [i.e Cost - Salvage value] will be depreciated in the year remaining vs sum of total useful life.

The freight and installation charges are part of capital asset.

Thanks,

X х Cla 9 25.09.2020 - Microsoft Excel Home Insert Page Layout Formulas Data Review View X 4 Cut Σ AutoSum Times New Rom 11 - A A A Wrap Text General E) Copy Fill Paste BI U Merge & Center 4.0 .00 .00 0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Cells 05 for A B С D E F G H j K L L M N o P Q R 1 2 Depreciation Schedule (Sum of year method] 3 4 Purchase Price 5 Freight & Installation 6 Depreciable cost 7 Useful Life 960 96 1056 15 Ü Year 1 2 3 4 5 6 7 8 9 10 11 8 12 13 Depreciable cost Rate of DepN Depreciation Acc DepN Book Value 1056 0.125 132 132 924 1056 0.116666667 123.2 255.2 800.8 1056 0.108333333 114.4 369.6 686.4 1056 0.1 105.6 475.2 580.8 1056 0.091666667 96.8 572 484 1056 0.083333333 88 660 396 1056 0.075 79.2 739.2 316.8 1056 0.066666667 70.4 809.6 246.4 1056 0.058333333 61.6 871.2 184.8 1056 0.05 52.8 924 132 1056 0.041666667 44 968 88 1056 0.033333333 35.2 1003.2 52.8 1056 0.025 26.4 1029.6 26.4 1056 0.016666667 17.6 1047.2 8.8 1056 0.008333333 8.8 1056 0 1056 9 14 10 15 16 11 12 13 17 18 14 19 15 120 20 21 22 8Th year Depreciation 70.4 23 24 25 Sheet1 Sheet4 Sheet2 Sheet3 Ready BO 100% + о 09:17 26-09-2020

X х 7 Cin 25.09.2020 - Microsoft Excel X 123 fx Σ Calculate Now Insert Function Home Insert Page Layout Formulas Data Review View Pa Define Name - Trace Precedents Show Formulas f Use in Formula Trace Dependents Error Checking AutoSum Recently Financial Logical Text Date & Lookup & Math More Name Watch Used - Time Reference & Trig. Functions Manager Create from Selection Remove Arrows Remove Arrows → Evaluate Formula Evaluate Formula Window Function Library Defined Names Formula Auditing K23 for A B C D E F G H 1 Calculation calculate Sheet Options Calculation K L M 1 2 Depreciation Schedule (Sum of year method] 4 Year 3 Purchase Price 960 5 Freight & Installation =+B4*10% 6 Depreciable cost=SUM(B4:B5) 7 Useful Life 15 1 2 3 4 8 9 5 10 6 11 7 Acc DepN Book Value =+G5 =+E5-H5 =+G6+H5 +E6-H6 =+H6+G7 =+E7-H7 =+H7+G8 =+E8-HS =+H8+G9 =+E9-H9 =+H9+G10 =+E10-H10 =+H10+G11 =+E11-H11 =+H11+G12 =+E12-H12 =+H12+G13 =+E13-H13 =+H13+G14 =+E14-H14 =+H14+G15 =+E15-H15 =+H15+G16 =+E16-H16 =+H16+G17 =+E17-H17 =+H17+G18 =+E18-H18 =+H18+G19 =+E19-H19 12 13 Depreciable cost Rate of DepN Depreciation 1056 =(B7-0)/D20 =+F5*E5 1056 =14/120 =+F6*E5 1056 =13/120 =+F7*E7 1056 =12/120 =+F8*E8 1056 =11/120 =+F9*E9 1056 =10/120 =+F10*E10 1056 =9/120 =+F11*E11 1056 =8/120 =+F12*E12 1056 =7/120 =+F13*E13 1056 =6/120 =+F14*E14 1056 =5/120 =+F15*E15 1056 =4/120 =+F16*E16 1056 =3/120 =+F17*E17 1056 =2/120 =+F18*E18 1056 =1/120 =+F19*E19 =SUM(GS:G19) 8 9 9 14 10 15 16 17 11 12 13 14 15 =SUM(D5:D19) 18 19 20 21 22 8Th year Depreciation =+G12 23 24 25 Sheet1 Sheet4 Sheet2 Sheet3 Ready BO 100% + O 09:18 26-09-2020