Question

A machine cost $800,000 on April 1, 2020. Its estimated salvage value is $80,000 and its...

A machine cost $800,000 on April 1, 2020. Its estimated salvage value is $80,000 and its expected life is 4 years.
Calculate the depreciation expense by straight-line for 2020. (Round answer to 0 decimal places, e.g. 5,275.)
Depreciation expense $
Calculate the depreciation expense by double-declining balance for 2021. (Round answer to 0 decimal places, e.g. 5,275.)
Depreciation expense $
Calculate the depreciation expense by sum-of-the-years'-digits for 2021. (Round answer to 0 decimal places, e.g. 5,275.)
Depreciation expense $
Which method would result in the smallest income amount for 2021?

Sum-of-the-years'-digits depreciationStraight-line depreciationDouble-declining depreciation
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Homework Answers

Answer #1

Straight line Depreciation = (Original Value - Salvage Value) / Useful Life
= ($800000 - 80000) / 4 = $180000

For 2020 = $180000 x 9/12 = $135000

Double Declining Balance Depreciation = Beginning Book Value x 2 times Straight line rate
For 2020 = $800000 x 50% x 9/12 = $300000
For 2021 = ($800000 - 300000) x 50% = $250000

Sum of Years Digit method = Original Value - Salvage Value) / Sum of Years x Years Remaining
For 2021 = $720000 / 10 x 4 x 3/12 + 720000 / 10 x 3 x 9/12 = $234000

Double Declining Balance method will result in smallest income amount.

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