Question

Depreciation for Partial Periods

The company purchased a machine on April 1 for $100,000. The machine has an estimated useful life of five years and an estimated salvage value of $15,000. The company computes partial-year depreciation to the nearest whole month.

Compute the amount of depreciation expense for this year and next year using sum-of-the-years'-digits depreciation. Round your answers to the nearest whole dollar.

Depreciation expense this year	$
Depreciation expense next year	$

Compute the amount of depreciation expense for this year and next year using double-declining-balance depreciation.

Depreciation expense this year	$
Depreciation expense next year	$

Answer 1

SUM-OF-THE-YEAR'S-DIGITS DEPRECIATION:
Depreciation expense this year				5 / 15 * 85000			28333.33
Depreciation expense next year				4 / 15 * 85000			22666.67
	sum of years 1+2+3+4+5   = 15
	Cost				100000
	Less: Salvage value				-15000
	Depreciable value				85000
DOUBLE DECLINING DEPRECIATION EXPENSES:
Depreciation expense this year				100000 * 40%			40000
Depreciation expense next year				(100000-40000)*40%			24000
Double declining percentage =			Straight line depreciation percentage * 2
			100 / life * 2
			100/5 * 2
			20*2 = 40%