Homework Answers
Straight Line Method
Cost of Machine = $40,000
Salvage Value = $4,000
Therefore,
Depreciable Value = 40000 - 4000 = $36,000
Annual Depreciation = Depreciable Value / Asset Life = 36000 / 10 = $3,600
Total Depreciation in 5 Years = 3600 * 5 = 18000
Therefore,
Book Value at end of Year 5 = Asset Cost - Total Depreciation in 5 Years
Or,
Book Value at end of Year 5 = 40000 - 18000
Or,
Book Value at end of Year 5 = $22,000
Double Declining Balance Method
Since the asset life is 10 Years,
Straight Line Depreciation Percent = 100% / 10 = 10%
Double Declining Depreciation Percentage = 10 * 2 = 20%
Therefore,
Depreciation in Year 1 = 40000 * 20% = 8000
Book Value at end of Year 1 = 40000 - 8000 = $32,000
Depreciation in Year 2 = 32000 * 20% = 6400
Book Value at end of Year 2 = 32000 - 6400 = $25,600
Depreciation in Year 3 = 25600 * 20% = 5120
Book Value at end of Year 3 = 25600 - 5120 = $20,480
Depreciation in Year 4 = 20480 * 20% = 4096
Book Value at end of Year 4 = 20480 - 4096 = $16,384
Depreciation in Year 5 = 16384 * 20% = 3277
Book Value at end of Year 5 = 16384 - 3277 = $13,107
Therefore,
Book Value at end of Year 5 = $13,107
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