Question

draw a cash flow diagram

NAME : DEPRECIATION A machine is purchased for $20,000 and has an expected life of 4 Ivage value at the end of 5 years is $4,000. a) Calculate the annual depreciation according to: 1) The Straight Line Depreciation Method 2) The Sum of the Year's Digit (SOYD) depreciation method b) what is the book value of the machine under each depreciation

Answer 1

Depreciation Gennen information - cost g machine purchaud - $29000 expected life . = 4 years. Salvage value a scrap value at see end of 5 years = $4,000 (a) (1) Straight line Depreciation Method In this method an equal amount is changed se written off every year from the asset. formula Amount of Depreciation = Cost of Asset - Scrap Value . runful life! Putting values; Amount of sep = $20,000 - $4,000 (Note: expected life was 4 years, but usage og machine was for 5 years) : Amant of sep = $16000 = $3200 $3,200 will be recorded as depreciation in each year

(2) Sum of year's Digit (3040) depreciation method fear years of digit Depreciation (Annual) $20.000 * 5/5 = 6,666.667 $20,000 X 4/15 = 5,333 333 $ 20,000 * 365 = 4,000 $ 20,000 > 3/5 = 2,616.66 7 $ 20,000 ,5 1,333,333 Formula used Depreciation & Cast of Asset x Rengining