Question

Waterway Company purchases equipment on January 1, Year 1, at a cost of $529,970. The asset is expected to have a service life of 12 years and a salvage value of $45,200.

Compute the amount of depreciation for Years 1 through 3 using the straight-line depreciation method. (Round answers to 0 decimal places, e.g. 5,125.)

Depreciation for Year 1		$
Depreciation for Year 2		$
Depreciation for Year 3		$

Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years'-digits method.

Depreciation for Year 1		$
Depreciation for Year 2		$
Depreciation for Year 3		$

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Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (Round depreciation rate to 2 decimal places, e.g. 15.84%. Round answers to 0 decimal places, e.g. 45,892.)

Depreciation for Year 1		$
Depreciation for Year 2		$
Depreciation for Year 3		$

Answer 1

Straight line method

Year 1 (529,970-45,200)/12	40,397
Year 2	40,397
Year 3	40,397

Sum of years digits.

Denominator = (12*13)/2 = 78

Year 1 (529,970-45,200)*12/78	74,580
Year 2 (529,970-45,200)*11/78	68,365
Year 3 (529,970-45,200)*10/78	62,150

Double declining method

Rate = 200/Useful life = 200/12 = 16.67%

Year 1 (529,970*16.67%)	88,345
Year 2 (529,970-88,345)*16.67%	73,618
Year 3 (529,970-88,345-73,618)*16.67%	61,346

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