Question

1. An asset is purchased on January 1 at a cost of $25,000. It is expected to be used for four years and have a salvage value of $1,000. Calculate the depreciation expense for each year of the asset's useful life under each of the following methods:

(Show Work)

1. Straight-line method
2. Double-declining-balance method
3. Sum-of-the-years-digits' method

Answer 1

a.) Depreciation under Straight-line-method:

Depreciation per year = (Cost of the asset - Salvage value)/ Expected life of the asset

= ($25000 - $1000)/ 4

= $6000

The amount of depreciation under the straight-line method will remain the same for all the 4 years.

b.) Depreciation under double declining method:

c.) Depreciation under Sum of years digits' method: