Consider the depreciation of a %5,000 asset with $0 salvage value. Assuming a 5
ID: 2521015 • Letter: C
Question
Consider the depreciation of a %5,000 asset with $0 salvage value. Assuming a 5 year depreciable life, develop the complete depreciation schedules for the asset showing year-by-year depreciation charges and book values, using:
(a) Straight Line
(b) Sum-of-years'-digits (SOYD)
(c) Declining Balance (DB) with 20% depreciation rate, and
(d) Modified accelerated cost recovery system (MACRS) depreciation.
Be sure to include complete depreciation schedules showing year-by-year depreciation amounts, and, book values, for each problem.
Explanation / Answer
Notes:
Declining Balance Method: 40% Depreciation is used
MACRS applicable percentage for property class is used for calculation
Years Straight Line WDV 1 1,000.00 4,000.00 2 1,000.00 3,000.00 3 1,000.00 2,000.00 4 1,000.00 1,000.00 5 1,000.00 - Years Sum of Digit Depreciation WDV 1 5000*5/15= 1,666.67 3,333.33 2 5000*4/15= 1,333.33 2,000.00 3 5000*3/15= 1,000.00 1,000.00 4 5000*2/15= 666.67 333.33 5 5000*1/15= 333.33 - Sum of Months 1+2+3+4+5= 15 Years Cost Depreciation WDV 0 5000 1 2000 3000 2 1200 1800 3 720 1080 4 432 648 5 259.2 388.8 MACRS Years Cost Depreciation % Depreciation WDV 0 5000 1 20% 1000 4000 2 32% 1600 2400 3 19.20% 960 1440 4 11.52% 576 864 5 11.52% 576 288 8 5.76% 288 0