Question

Exercise 11-1 Sage Company purchases equipment on January 1, Year 1, at a cost of $586,250. The asset is expected to have a service life of 12 years and a salvage value of $50,000. Compute the amount of depreciation for Years 1 through 3 using the straight-line depreciation method. (Round answers to 0 decimal places, e.g. 5,125.) Depreciation for Year 1 $ Depreciation for Year 2 $ Depreciation for Year 3 $ LINK TO TEXT 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 $

Exercise 11-1 Sage Company purchases equipment on January 1, Year 1, at a cost of $586,250. The asset is expected to have a service life of 12 years and a salvage value of $50,000. Compute the amount of depreciation for Years 1 through 3 using the straight-line depreciation method. (Round answers to 0 decimal places, e.g. 5,125.) Depreciation for Year 1 & Depreciation for Year 2 Depreciation for Year 3 LINK TO TEXT 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 25 Depreciation for Year 3 LINK TO TEXT

Answer 1

Requirement 1 Computation of Depreciation under Staright line method : Cost Less : Salvage Value Depreciable value (A) Asset life (B) Annual Straight line depreciation value (A/B) $ 586,250.00 $ (50,000.00) $ 536,250.00 12 years $ 44,688 Depreciation for year 1 Depreciation for year 2 Depreciation for year 3 44,688 44,688 44,688 $ Note : Depreciation for every year will be same under straight line method Requirement 2 Computation of Depreciation under Sum of Years Digit Method : Cost Less : Salvage Value Depreciable value (A) $ 586,250.00 $ (50,000.00) $ 536,250.00 Sum of Years = 1+2+3+4+5+6+7+8+9+10+11+12 78 Year Depreciation for year 1 Depreciation for year 2 Depreciation for year 3 Sum of years Depreciation expense = Depreciation expense * numerator(Years) / Sum of years 78 $ 82,500.00 78 $ 75,625.00 78 $ 68,750.00 11 10

Requirement 1 Computation of Depreciation under Staright line method $586,250.00 $ (50,000.00) $536,250.00 Cost Less Salvage Value Depreciable value (A) Asset life (B) 12 years Annual Straight line depreciation value (A/B) 44,688 $ Depreciation for year 1 Depreciation for year 2 Depreciation for year 3 44,688 44,688 44,688 Note Depreciation for every year will be same under straight line method Requirement 2 Computation of Depreciation under Sum of Years Digit Method 586,250.00 $(50,000.00) $536,250.00 Cost Less Salvage Value Depreciable value (A) Sum of Years = 1+2+3+4+5+6+7+8+9+10+11+12 78 Sum of years Depreciation expense = Depreciation expense* numerator (Years) / Sum of years Year 78 $ Depreciation for year 1 Depreciation for year 2 Depreciation for year 3 82,500.00 12 78 $ 11 75,625.00 78 $ 10 68,750.00

Requirement 3 Computation of Depreciation under Double Declining Balance method : Cost 586,250.00 Less : Salvage Value (50,000.00) Depreciable value (A) 536,250.00 Alu 8.33% Annual Staright line depreciation rate = 44688/536250 Double Declining factor Double Declining Annual rate 200% 16.67% Year Beginning Balance 1 $ 586,250.00 2 $ 488,522.13 3 $ 407,085.49 Double Declining Annual Annual depreciation amount Ending Balance 0.1667 $ 97,728 $ 488,522 0.1667 $ 81,437 $ 407,085 0.1667 $ 67,861 $ 339,224