Question

Windsor Company purchases equipment on January 1, Year 1, at a cost of $516,000. The asset is expected to have a service life of 12 years and a salvage value of $46,440.

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

Depreciation for Year 1		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 2		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 3		$enter a dollar amount rounded to 0 decimal places

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

Depreciation for Year 1		$enter a dollar amount
Depreciation for Year 2		$enter a dollar amount
Depreciation for Year 3		$enter a dollar amount

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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		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 2		$enter a dollar amount rounded to 0 decimal places
Depreciation for Year 3		$enter a dollar amount rounded to 0 decimal places

Answer 1

Depreciation expense = (Cost - Salvage value)/Useful life

= (516,000-46,440)/12 = 39,130

Depreciation for year 1	39,130
Depreciation for year 2	39,130
Depreciation for year 3	39,130

Sum of digits = [12*13]/2 = 78

Depreciation for year 1 (516,000-46,440)*12/78	72,240
Depreciation for year 2 (516,000-46,440)*11/78	66,220
Depreciation for year 3 (516,000-46,440)*10/78	60,200

Double declining rate = 200/Useful life = 200/12 = 16.67%

Depreciation for year 1 (516,000*16.67%)	86,017
Depreciation for year 2	71,678
Depreciation for year 3	59,729