Question

It is expected that a small water pump will cost $2020 when purchased in 2003. It is further expected to have a salvage value of $520 at the end of its five year depreciable life. Calculate manually complete depreciation schedules giving the depreciation charge, and end-of-year book value for:

a) Straight line method

b) Sum-of-the-years digit method

c) Double declining balance method

Answer 1

a) Straight line method

Depriciation = initial cost-salvage value/ expected life

=$2020-$520/5=$300

Year	Depriciation	Book value at the end of the year
1	$300	$1720
2	$300	$1420
3	$300	$1120
4	$300	$820
5	$300	$520

b) sum-of-the-years digit method

sum of the years=5+4+3+2+1=15

Depriciation for 1st year=5/15*100=33.33%=

Depriciation for 2nd year=4/15*100=26.67%

Depriciation for 3rd year=3/15*100=20%

Depriciation for 4th year=2/15*100=13.33%

Depriciation for 5thyear=1/15*100=6.67%

Year	Depriciation (initial cost-salvage value*%of depriciation)	Book value at the end of the year (prevoius year bookvalue-depriciation)
1	$499.95	$1520.05
2	$400.05	$1120
3	$300	$820
4	$199.95	$620.05
5	$100.05	$520