In early January 2015, NewTech purchases computer equipment for $146,000 to use
ID: 2459994 • Letter: I
Question
In early January 2015, NewTech purchases computer equipment for $146,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $30,000.
Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.
i have the following
cost minus salvage=116000
estimated useful life(years)=4
annual depreciation expense= 29,000
2015-2018 annual depreciation = 29000
i am missin the year end book value for the following years 2015-2018
i am not sure how to calculate it.
Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.
Explanation / Answer
The double declining balance method of depreciation, is a form of method in which accelerated depreciation is charged. Accelerated depreciation means assets will be depreciated at higher rate. Normally this rate is double the original rate. For example If the rate of depreciation is 10 %. Under the accelerated or double decline method it will be 20 % or twice of the original rate.
In the given question, the depreciated value of the asset is $ 54000 -$ 7800= $ 46,200. The asset is to be depreciated in 10 years, hence the rate of depreciation is 10 %. Since we are applying double decline method, the actual rate of depreciation for the year 1 is $ 4620 x 2 = $ 9,240. In the second year depreciation would be 20 % of $ 46,200 - $ 9,240 = $ 36960 which is $ 7392.
The calculation can be explained in excel sheet in following ways:
Computation of the depreciation of the assets for first and second year
Actual cost of acquisition of assets
$54,000
Salvage value of the asset
$7,800
Depreciable value of the Assets
$46,200
Since it is to be depreciated in 10 years hence its rate of depreciation would be 10 %, which would be doubled or 20 % under double depreciation method
$9,240
Value of the assets after the end of first year
$36,960
Since it is to be depreciated in 10 years hence its rate of depreciation would be 10 %, which would be doubled or 20 % under double depreciation method
$7,392
Value of the assets after the end of IIND year
$29,568
Computation of the depreciation of the assets for first and second year
Actual cost of acquisition of assets
$54,000
Salvage value of the asset
$7,800
Depreciable value of the Assets
$46,200
Since it is to be depreciated in 10 years hence its rate of depreciation would be 10 %, which would be doubled or 20 % under double depreciation method
$9,240
Value of the assets after the end of first year
$36,960
Since it is to be depreciated in 10 years hence its rate of depreciation would be 10 %, which would be doubled or 20 % under double depreciation method
$7,392
Value of the assets after the end of IIND year
$29,568