11 January, 15:10

# Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of \$469,000. The asset is expected to have a service life of 12 years and a salvage value of \$40,000.Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years'-digits method.Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (Round depreciation rate to 2 decimal places, e. g. 15.84%. Round answers to 0 decimal places, e. g. 45,892.)

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1. 11 January, 16:54
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to calculate depreciation using the sum-of-the-years'-digits method:

n (n+1) divided by 2 = [12 (13) ] / 2 = 78

depreciable value = cost - salvage value = \$469,000 - \$40,000 = \$429,000

depreciation year 1 = 12/78 x \$429,000 = \$66,000 depreciation year 2 = 11/78 x \$429,000 = \$60,500 depreciation year 3 = 10/78 x \$429,000 = \$55,000

the formula used to calculate depreciation using the double-declining-balance method is:

2 x cost of the asset x depreciation rate

depreciation year 1 = 2 x \$469,000 x 1/12 = \$78,167 depreciation year 2 = 2 x (\$469,000 - \$78,167) x 1/12 = \$65,139 depreciation year 3 = 2 x (\$390,833 - \$65,139) x 1/12 = \$54,282