Answer:
Explanation:
1. Calculate Straight-line depreciation
= Cost - salvage value/useful life
= $52,000 - $7,000/5
= $45,000/5
= $9,000 per year for 5 years
2. Double-declining-balance depreciation.
= 2 X Cost of the asset/Useful Life
= 2 x $52,000/5
= $104,000/5
= $20,800 year 1
= 2 X Cost of the asset/Useful Life
= 2 x (52,000-20,800)/4
= 2 x 31,200/4
=$62,400/4
= $15,600 year 2
= 2 X Cost of the asset/Useful Life
= 2 x (52,000-20,800-15,600)/3
= 2 x 15,600/3
= $31,200/3
= $10,400 year 3
= 2 X Cost of the asset/Useful Life
= 2 x (52,000-20,800-15,600- 10,400)/2
= 2 x 5,200/2
Since the cost bal is less than the salvage value, we have to stop here.
1) With the Straight-line Depreciation method, Copland Drugstore's depreciation expense for each of the five years is $9,000.
2) With Double-declining-balance method, Copland Drugstore's depreciation for each of the five years are:
Year 1 Year 2 Year 3 Year 4 Year 5
Depreciation $20,800 $12,480 $7,480 $4,240 $0
Data and Calculations:
Cost of the computer system = $52,000
Expected useful life = 5 years
Salvage value = $7,000
Depreciable amount based on straight-line method = $45,000 ($52,000 - $7,000)
Annual depreciation = $9,000 ($45,000/5)
Double-declining-balance method:
Depreciation rate = 40% (100/5 x 2)
Depreciation expenses:
Year 1 = $20,800 ($52,000 x 40%)
Declining balance = $31,200 ($52,000 - $20,800)
Year 2 = $12,480 ($31,200 x 40%)
Declining balance = $18,720 ($31,200 - $12,480)
Year 3 = $7,480 ($18,720 x 40%)
Declining balance = $11,240 ($18,720 - $7,480)
Year 4 = $4,240 ($11,240 - $7,000)
Declining balance = $7,000 ($11,240 - $4,232)
Year 5 = $0
Declining balance = $7,000
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