Question

On July 1, 2020, Flint Company purchased for $3,960,000 snow-making equipment having an estimated useful life...

On July 1, 2020, Flint Company purchased for $3,960,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $165,000. Depreciation is taken for the portion of the year the asset is used.

(a)

Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the
1. sum-of-the-years'-digits method.
2. double-declining balance method.

Homework Answers

Answer #1
1) Sum of the years 15 (5 + 4 + 3 + 2 + 1)
Depreciable Cost $ 3,795,000.00 ($ 3960000 - $ 165000)
Depreciation for the year:
2020 = $    632,500.00 ($ 3795000 x 5/15 x 6/12)
2021 = $ 1,138,500.00 ($ 3795000 x 5/15 x 6/12) + ($ 3795000 x 4/15 x 6/12)
Year End Book Values:
2020 = $ 3,327,500.00 ($ 3960000 - $ 632500)
2021 = $ 2,189,000.00 ($ 3327500 - $ 1138500)
2) Useful Life 5 years
Rate of Depreciation 40% (100% / 5 ) x 2
Depreciation for the year:
2020 = $    792,000.00 ($ 3960000 x 40% x 6/12)
2021 = $ 1,267,200.00 [($ 3960000 - $ 792000) x 40%]
Year End Book Values:
2020 = $ 3,168,000.00 ($ 3960000 - $ 792000)
2021 = $ 1,900,800.00 ($ 3168000 - $ 1267200)
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