Question

Assume that a company purchased a new plant asset for $640500 on January 1, 2018. The...

Assume that a company purchased a new plant asset for $640500 on January 1, 2018. The management team believes that the asset will last for 3 years and that it will have a salvage value of $70500. If they report deep]reciation expense of $95,000 for this asset in 2020, what depreciation method is the company using?

Sum-of-the-years' digits

Double Decline Balance

Straight-line

Cannot tell from information provided

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Answer #1

A) sum of year digist

straight line method
particuals amuont
cost 6,40,500.00
useful life 3
salvage value 70,500.00
dep value 5,70,000.00
dep value 1,90,000.00
sum of the year digit method
year dep value fraction dep amount
2018 5,70,000.00 0.5 2,85,000.00
2019 5,70,000.00 0.33333333 1,90,000.00
2020 5,70,000.00 0.16666667 95,000.00
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