Indigo Company purchased a new plant asset on April 1, 2017, at a cost of $810,5
ID: 2571987 • Letter: I
Question
Indigo Company purchased a new plant asset on April 1, 2017, at a cost of $810,540. It was estimated to have a service life of 20 years and a salvage value of $68,400. Indigo's accounting period is the calendar year Compute the depreciation for this asset for 2017 and 2018 using the sum-of-the-years'-digits method. (Round answers to 0 decimal places, e.g 45,892.) Depreciation for 2017 Depreciation for 2018 LINK TO TEXT Compute the depreciation for this asset for 2017 and 2018 using the double-declining-balance method. (Round answers to 0 decimal places, e.g. 45,892.) Depreciation for 2017 Depreciation for 2018Explanation / Answer
Cost of Asset $ 810,540 Salvage value $ 68,400 Depreciable cost(cost-salvage) = $ 742,140 Estimated life 20 years Depreciation under Sum of years method Sum of digit of years = 210 Depreciation for 2017 = Depreciable cost /total sum of years *20 *9/12 742140 /210 * 20 *9/12 = $ 53,010 Depreciation for 2018 = 742140 /210 *20 *3/12 + 742140 /210 *19 *9/12 = $ 68,030 Depreciation under Double declining method: Annual depreciation under SLM = Depreciable cost /life = 742140/20 = $37,107 rate uunder SLM = 37107 /742140 *100 = 5% Rate under Double declining = 5*2 =10% Depreciation in 2017 = 810,540 *10%*9/12 = $60,790 Book value at the end of 2017 = 810,540-60,790 = $ 749,750 Depreciation in 2018 = 749750*10% = $ 74,975