Question

Gamma Inc. bought new office furniture in the year 2002. The purchase cost was 61243 dollars...

Gamma Inc. bought new office furniture in the year 2002. The purchase cost was 61243 dollars and in addition it had to spend 14078 dollars for installation. The furniture has been in use since March 16th, 2002. Gamma forecasted that in 2017 the office furniture would have a net salvage value of $2500. Using the US Accelerated Depreciation Schedule, estimate the value of depreciation recorded in the accounting books in the year 2006 if the company decided to sell the furniture on May 10th (of 2006).

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Answer #1

Answer- Accelerated Depreciation is a depreciaton method where by an assets loses book value at a faster rate then the traditional straight line method.

The most popular method of accelerated deprecaiation schedule is sum of years digits method.

Calculation of Depeciation-

Value of machinery =Purchase cost + installtion expenses

= $61243+$14078

=$75321

Net salvage value = $2500

Life of the furniture = 15 years

Deprecation=Yearsof useful life/(15+14+13+12+11+10+9+8+7+6+5+4+3+2+1)*(Original value - salvage value)

=15/120*($75321-$2500)

=$9102.625 per year

Value of Furniture on 10th may 2006={$75321(-$9102.625*4)}

=$38910.5

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