Question

Sunland Company purchased a new plant asset on April 1, 2020, at a cost of $750,000. It was estimated to have a service life of 20 years and a salvage value of $61,200. Sunland’ 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
Depreciation for 2021		$enter a dollar amount

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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
Depreciation for 2021		$enter a dollar amount

Answer 1

In Double Decline Methord salvage value is not reduced from the cost price to calculate depreciation . It is because if depreciation is reduced from the book value in the first year the depreciated value of the asset will not become zero or become the salvage value as the rate is basically double the actuel rate