Instructions: Using the sum-of the-years\'-digit and double-declining balance de
ID: 2413956 • Letter: I
Question
Instructions: Using the sum-of the-years'-digit and double-declining balance depreciation methods, compute the depreciation expense for years 2016 and 2017, and the book value of the machine at the end of 2017 for each of the following two independent cases. Please show your work briefly and have your fina final answers in the tables to the nearest dollar when needed l answers summarized in the tables, Round the a. Todd Co. acquired a machine on Jan. 1, 2016, at a cost of s58,000. The machine has an estimated salvage value of $9,000 at the end of its 7-year useful life. The depreciation adjustment is done at the end of every calendar year Depreciation expense Depreciation expese Book value as of Depreciation method Sum-of-the-years-digits Double declining balance for 2016 for 2017 Dec. 31, 2017 b. Edison Co. acquired a equipment on April 1, 2016, at a cost of $58,000. The machine has an estimated salvage value of $9,000 at the end of its 7-year useful life. The depreciation adjustment is done at the end of every calendar year Depreciation expense Depreciation expenseBook value as of Depreciation method Sum-of-the-years'-digits Double declining balance for 2016 for 2017 Dec. 31, 2017Explanation / Answer
QUESTION (A) – TODD COMPANY
Depreciation Method
Depreciation Expenses for 2016
Depreciation Expenses for 2017
Book Value as of December 31, 2017
Sum - of - the - years Digit
$12,250
$10,500
$35,250
Double Declining Balance
$16,571
$11,837
$29,592
Sum - of - the - years Digit Method
Depreciation Sum of Years Digits Method = [ Cost – Salvage Value ] x Years Fraction
Book Value = Cost of the Asset – Accumulated Depreciation
Depreciation Expenses for 2016 = [ $58,000 – 9,000 ] x 7/28 = $12,250
Depreciation Expenses for 2017 = [ $58,000 – 9,000 ] x 6/28 = $10,500
Book Value as of December 31, 2017 = $58,000 – 12,250 – 10,500 = $35,250
Double Declining Balance Method
Double Declining Depreciation = 2 x Straight Line Depreciation Rate x Book Value Beginning
Straight Line Depreciation Rate = 1 / Useful Life = 1 / 7= 0.142857
Depreciation Expenses for 2016 = 2 x 0.142857 x $58,000 = $16,571
Depreciation Expenses for 2017 = 2 x 0.142857 x [ 58,000 – 16,571 ] = $11,837
Book Value as of December 31, 2017 = $58,000 – 16,571 – 11,837 = $29,592
QUESTION (B) – EDISON Co
Depreciation Method
Depreciation Expenses for 2016
Depreciation Expenses for 2017
Book Value as of December 31, 2017
Sum - of - the - years Digit
$9,188
$10,500
$ 38,312
Double Declining Balance
$12,429
$13,020
$32,551
Sum - of - the - years Digit Method
Depreciation Sum of Years Digits Method = [ Cost – Salvage Value ] x Years Fraction
Book Value = Cost of the Asset – Accumulated Depreciation
Depreciation Expenses for 2016 = [ $58,000 – 9,000 ] x 7/28 x 9/12 = $9,188
Depreciation Expenses for 2017 = [ $58,000 – 9,000 ] x 6/28 = $10,500
Book Value as of December 31, 2017 = $58,000 – 9,188 – 10,500 = $ 38,312
Double Declining Balance Method
Double Declining Depreciation = 2 x Straight Line Depreciation Rate x Book Value Beginning
Straight Line Depreciation Rate = 1 / Useful Life = 1 / 7= 0.142857
Depreciation Expenses for 2016 = [ 2 x 0.142857 x $58,000 ] x 9/12 = $12,429
Depreciation Expenses for 2017 = 2 x 0.142857 x [58,000 – 12,429] = $13,020
Book Value as of December 31, 2017 = $58,000 – 12,429 – 13,020 = $32,551
Note
The Fraction of 9 Months / 12 Months was taken since the Equipment was Acquired on April 1, 2016, Therefore, Only the proportionate Depreciation will be taken for the Year 2016
Depreciation Method
Depreciation Expenses for 2016
Depreciation Expenses for 2017
Book Value as of December 31, 2017
Sum - of - the - years Digit
$12,250
$10,500
$35,250
Double Declining Balance
$16,571
$11,837
$29,592