Depreciation for Partial Periods The company purchased a mac

Depreciation for Partial Periods

The company purchased a machine on April 1 for $100,000. The machine has an estimated useful life of five years and an estimated salvage value of $15,000. The company computes partial-year depreciation to the nearest whole month.

Compute the amount of depreciation expense for this year and next year using sum-of-the-years\'-digits depreciation. Round your answers to the nearest whole dollar.

Compute the amount of depreciation expense for this year and next year using double-declining-balance depreciation.

Depreciation expense this year	$
Depreciation expense next year	$

Solution

SUM-OF-THE-YEAR\'S-DIGITS DEPRECIATION: Depreciation expense this year 5 / 15 * 85000 28333.33 Depreciation expense next year 4 / 15 * 85000 22666.67 sum of years 1+2+3+4+5   = 15 Cost 100000 Less: Salvage value -15000 Depreciable value 85000 DOUBLE DECLINING DEPRECIATION EXPENSES: Depreciation expense this year 100000 * 40% 40000 Depreciation expense next year (100000-40000)*40% 24000 Double declining percentage = Straight line depreciation percentage * 2 100 / life * 2 100/5 * 2 20*2 = 40%