Exercise 1114 Doubleaeciningbalance method switcn to straigh

Exercise 11-14 Double-aecining-balance method; switcn to straight line ILO11-2, 11-6] ing process. The equipment has ar estimated life of eight years and an estimated residual value of $35,500. The expenditures made to acquire the asset were as fo $170,500 3,200 s,500 Jackson\'s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment\'s life a then switch to straight line halfway through the equipment\'s life. Required: 1. Calculate depreciation for each year of the asset\'s eight-year life. DCulcate depreciation for each year of the assets eight year ation for the Period End Beginning of Period Book DepreciationAnnualAccumulated Rate Depreciation ation Value 2018 2019 2020 2021 2023 2024 2025 Total

Solution

Answers

A

Purchase price

$                              1,70,500.00

B

Freight

$                                    3,200.00

C

Installation

$                                    5,500.00

D=A+B+C

Beginning Period Book Value - Cost capitalized

$                              1,79,200.00

E

Residual Value

$                                 35,500.00

F=D – E

Depreciable base

$                              1,43,700.00

G

Useful Life

8

H = F/G

Annual Depreciation as per SLM

$                                 17,962.50

I = H/F

SLM Rate

12.50%

J = I x 2

DDB rate

25%

Year

Beginning of Period Book Value

Depreciation Rate

Annual Depreciation

Accumulated Depreciation

Book Value

2018

$                              1,79,200.00

25%

$             44,800.00

$         44,800.00

$           1,34,400.00

2019

$                              1,34,400.00

25%

$             33,600.00

$         78,400.00

$           1,00,800.00

2020

$                              1,00,800.00

25%

$             25,200.00

$     1,03,600.00

$               75,600.00

2021

$                                 75,600.00

25%

$             18,900.00

$     1,22,500.00

$               56,700.00

2022

$                                 56,700.00

$               5,300.00

$     1,27,800.00

$               51,400.00

2023

$                                 51,400.00

$               5,300.00

$     1,33,100.00

$               46,100.00

2024

$                                 46,100.00

$               5,300.00

$     1,38,400.00

$               40,800.00

2025

$                                 40,800.00

$               5,300.00

$     1,43,700.00

$               35,500.00

Total

$         1,43,700.00

A

Book Value at the end of 4 years [2021]

$         56,700.00

B

Residual Value

$         35,500.00

C = A - B

Depreciable base(remaining)

$         21,200.00

D = 8 years - 4 years

Remaining Life

4 years

E = C/D

SLM Depreciation

$           5,300.00 [21200/4]

A	Purchase price	$                              1,70,500.00
B	Freight	$                                    3,200.00
C	Installation	$                                    5,500.00
D=A+B+C	Beginning Period Book Value - Cost capitalized	$                              1,79,200.00
E	Residual Value	$                                 35,500.00
F=D – E	Depreciable base	$                              1,43,700.00
G	Useful Life	8
H = F/G	Annual Depreciation as per SLM	$                                 17,962.50
I = H/F	SLM Rate	12.50%
J = I x 2	DDB rate	25%