The New Hospital has raised money for a new oncology wing Th

The New Hospital has raised money for a new oncology wing. The hospital has also acquired medical diagnostic equipment that cost $500,000 total. In addition, the hospital had to pay $15,000 to have equipment shipped to it from the manufacturer, and $40,000 to install the equipment. It is expected to have a 6-year life and a $30,000 salvage value. Calculate the six years of depreciation using straight line, double declining balance and sum-of-the years. NOTE: You need only enter data into the grey shaded areas, the remainder (yelow) cells will calculate automatically. Asset Cost Asset Lide Each Year Asset Cost Asset Cost Asset Life Asset Life INUM Double Balance Annual Annual Year S0 $0 $0 $O S0 “Note: Bythe end ofthe sath year, the DOB method must take enough depreciaton in total to have accur uled depreciation equal to the Depreciable Base Therefore the depreciation in the last year is computed by subtracting the accumulated depreciation at the end of the second y from the depreciable base of $525000

Solution

Asset Cost: 555000 (500000+15000+40000) salage Value: 30000 Asset Life: 6 (555000-30000)/6 Straight line depreciation per year $                      87,500 Asset Cost: 555000 salage Value: 30000 Sum of years = (6+5+4+3+2+1) = 21 Asset Life: 6 Depreciation year 1 Depreciation (555000-30000)*6/21 Sum of the years digits depreciation $                    150,000 Asset Cost: 555000 salage Value: 30000 Asset Life: 6 Depreciation year 1 (55000 x 2/6) Double declining Balance Depreciation $                    185,000 (100%/6) x 2 Rate Straight Line Double declining balance SYD-Method Year Annual Depreciation Accu. Depreciation Annual Depreciation Accu. Depreciation Annual Depreciation Accu. Depreciation 1                                 87,500                           87,500                            185,000                            185,000          150,000          150,000 2                                 87,500                        175,000                            123,333                            308,333          125,000          275,000 3                                 87,500                        262,500                              82,222                            390,556          100,000          375,000 4                                 87,500                        350,000                              54,815                            445,370            75,000          450,000 5                                 87,500                        437,500                              36,543                            481,914            50,000          500,000 6                                 87,500                        525,000                              43,086                            525,000            25,000          525,000 (525000-481914) Ending depreciation is balancing Double declining balance uses 100%/life x 2 as rate for double speed depreciation And this rate is applied to the book value after depreciation and ending year it’s a balancing figure to make it finish at end of life Sum of year digit method divide the depreciable base by sum of years and this fraction is multiplied by 6 for 1 year, 5 for 2nd year, 4 for 3 year and so on.