Question

Depreciation for Partial Periods Hathaway Company purchased a copying machine for $8,700 on October 1, 2019. The machine's residual value was $500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.) Straight-line method 2019 $ 2020 $ Sum-of-the-years'-digits method 2019 $ 2020 $ Double-declining-balance method 2019 $ 2020 $ Next Level Which method produces the highest book value at the end of 2020

Answer 1

straight line method

• 2019: $410
• 2020: $1,640

sum of digits method

• 2019: $683.33
• 2020: $2,596.67

double declining method

• 2019: $870
• 2020: $3,134

Which method produces the highest book value at the end of 2020?

• the straight line method because the deprecation expense is lowest, book value at Dec. 31, 2020 = $6,650

Step-by-step explanation:

copying machine purchased October 1, 2019 at $8,700

residual value $500

expected life 5 years

depreciation using straight line method:

depreciation expense per year: ($8,700 - $500) / 5 = $1,640

2019: $1,640 x 3/12 = $410

2020: $1,640

sum of digits method:

depreciation first year = 5/15 x $8,200 = $2,733.33

2019: $2,733.33 x 3/12 = $683.33

2020: $2,733.33 x 9/12 = $2,050

$8,200 x 4/15 x 3/12 = $546.67

total 2020: $2,596.67

double declining balance:

depreciation year 1 = 2 x 20% x $8,700 = $3,480

2019: $3,480 x 3/12 = $870

2020: $3,480 - $870 = $2,610

2 x 20% x ($8,700 - $3,460) x 3/12 = $524

total 2020 = $2,610 + $524 = $3,134