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

Answer:

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