Homework SourseStraightLine DecliningBalance and SumoftheYearsDigits Method
Straight-Line, Declining-Balance, and Sum-of-the-Years\'-Digits Methods
A light truck is purchased on January 1 at a cost of $33,840. It is expected to serve for eight years and have a salvage value of $4,800. Calculate the depreciation expense for the first and third years of the truck’s life using the following methods. If required, round your answers to the nearest cent.
| Depreciation Expense | ||
| Year 1 | Year 3 | |
| 1. Straight-line | $ | $ |
| 2. Double-declining-balance | $ | $ |
| 3. Sum-of-the-years\'-digits | $ | $ |
Solution
Answer
A
Cost
33840
B
Residual value
4800
C=A-B
Depreciable base
29040
D
Expected Life
8
E=C/D
Annual SLM Depreciation
3630
Year
Opening Book Value/Carrying Value
SLM Depreciation
Closing Carrying Value
1
33840
3630
30210
2
30210
3630
26580
3
26580
3630
22950
4
22950
3630
19320
5
19320
3630
15690
6
15690
3630
12060
7
12060
3630
8430
8
8430
3630
4800
A
Cost
33840
B
Residual value
4800
C=A-B
Depreciable base
29040
D
Expected Life
8
E=C/D
Annual SLM Depreciation
3630
F=E/C
SLM Rate
12.5%
G=F x 2
Double declining Rate
25.0%
Year
Opening Book Value/Carrying Value
Rate of Dep
DDB depreciation
Closing Carrying Value
1
33840
25%
8460
25380
2
25380
25%
6345
19035
3
19035
25%
4759
14276
4
14276
25%
3569
10707
5
10707
25%
2677
8030
6
8030
25%
2008
6023
7
6023
25%
1223
4800
8
4800
0
4800
Sum of year’s digit = 1+2+3+4+5+6+7+8=36
Year
Remaining Life
Opening Book Value
Depreciation = 29040 x (remaining life/36)
Closing Book Value
1
8
33840
6453
27387
2
7
27387
5647
21740
3
6
21740
4840
16900
4
5
16900
4033
12867
5
4
12867
3227
9640
6
3
9640
2420
7220
7
2
7220
1613
5607
8
1
5607
807
4800
Depreciation Expense
Year 1
Year 3
1. Straight-line
$3630
$3630
2. Double-declining-balance
$8460
$4759
3. Sum-of-the-years\'-digits
$6453
$4840
| A | Cost | 33840 |
| B | Residual value | 4800 |
| C=A-B | Depreciable base | 29040 |
| D | Expected Life | 8 |
| E=C/D | Annual SLM Depreciation | 3630 |
