88.0k views
3 votes
Answer each question using the information below. Each question is independent of the others.

Equipment Cost $134,000
Installation Labor $4,500
Freight $10,000
Repairs of Damage during installation $6,000
Insurance on Freight $1,500
Estimated Salvage Value $20,000
Useful LIfe 8 years

Required:
a. What is the BOOK VALUE after 3 years of depreciation, using Straight-Line?
b. What is the ACCUMULATED DEPRECIATION after 3 years, using DOUBLE DECLINING BALANCE?

1 Answer

7 votes

Answer:

$105000

$90187.5

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

Cost of asset = $134,000 + $4,500 + $10,000 + $6,000 + $1,500 = $156,000

Depreciation expense = ($156,000 - $20,000) / 8 = $17,000

Book value = cost of asset - Accumulated depreciation

Accumulated depreciation is sum of depreciation expense

Accumulated depreciation at the end of three years = $17,000 x 3 = $51,000

$156,000 - $51,000 = $105,000

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2 x(1/8) = 1/4

Depreciation expense in year 1 = 1/4 x $156,000 = $39,000

book value = $156,000 - $39,000 = $117000

Depreciation expense in year 2 = 1/4 x $117000 = $29,250

book value = $117000 - $29,250 = $87750

Depreciation expense in year 3 = 1/4 x $87500 = 21937.50

Add the depreciation expense from year 1 to 3 to derive the accumulated depreciation

User Dennie
by
7.7k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories