Question

The York City Hospital has just acquired new equipment. The equipment cost $4,250,000, and the organization spent $135,000 on upgrading the physical plant the new equipment will be located in. The equipment is expected to have a 10-year useful life and a salvage value of 10% (i.e., $425,000). Calculate the first 5 years of depreciation, using SL, DDB, and SYD.

Answer 1

Depreciation Straight Line Method= Acquisition Cost - Salvage Value/ Useful Life

Depreciation Straight Line Method= $ 4250000+ $ 135,000- 425,000/ 10

Depreciation Straight Line Method= 4385,000- 425,000/10= 3960,000/10=

Depreciation Straight Line Method= $396,000

Straight Line Rate= 100%/ useful Life= 100%/10 = 10%

Double Declining Method = 2 * Straight Line Rate

Double Declining Method = 2 * Straight Line Rate= 2*10%= 20%

Year Book Value Dep Rate Dep Expense Accu. Dep. Book Value

1 4385,000 20% $ 877,000 877,000 3508,000

2 3508,000 20% 701,600 1578,600 2806,400

3 2806,000 20% 561,280 2139,880 2245,120

4 2245,120 20% 449,024 2588,904 1796,096

5 1796,096 20% 359, 219.2 2948,123 1409,876

Sum of Year Digits Method Depreciation

10+9+8+7+6= 40

Year Depreciation Remaining Dep Dep. Ex. Bk Value

Base Life Fraction

1 4385,000 10 10/40 1096250 3288750

2 4385,000 9 9/40 986,625 2302125

3 4385,000 8 8/40 877,000 1425,125

4 4385,000 7 7/40 767,375 657,750

5 4385,000 6 6/40 657,750 Zero