Question

# Windsor Company purchased a new plant asset on April 1, 2020, at a cost of \$735,000....

Windsor Company purchased a new plant asset on April 1, 2020, at a cost of \$735,000. It was estimated to have a service life of 20 years and a salvage value of \$58,800. Windsor’ accounting period is the calendar year.

Compute the depreciation for this asset for 2020 and 2021 using the sum-of-the-years'-digits method. (Round answers to 0 decimal places, e.g. 45,892.)

 Depreciation for 2020 \$enter a dollar amount \$enter a dollar amount

Compute the depreciation for this asset for 2020 and 2021 using the double-declining-balance method. (Round answers to 0 decimal places, e.g. 45,892.)

 Depreciation for 2020 \$enter a dollar amount \$enter a dollar amount

(A)

Under sum-of-the-years'-digit method,

depreciable value = initial cost - salvage value

= \$735000 - \$58800 = \$676200

Depreciation per annum = depreciable value x (remaining useful life of asset/sum of the years' digit)

Sum of the years' digit = 1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16+17+18+19+20 = 210

Therefore,

For 2020 (9 months)

Depreciation expenses = \$676200 x (20/210) x (9/12)

= \$64400 x (9/12) = \$48300

For 2021

Depreciation expenses = \$676200 x (19/210) = \$61180

(B)

Under double declining balance method,

Depreciation per annum = (200%/useful life) x book value at the beginning of period

Therefore

For 2020 (9 months):

Book value in the beginning = \$735000

Depreciation expenses = (200%/20) x \$735000 x (9/12)

= \$73500 x (9/12) = \$55125

Book value at the end = \$679875

For 2021:

Book value in the beginning = \$679875

Depreciation expenses = 10% x \$679875 = \$67988

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