Question

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.

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)