Answer to Question #193702 in Accounting for yibrah

Question

1.      A plant Asset acquired on January 2 at a cost of 275,000 has an estimated useful life of 10 years. Assuming that it will have no residual value, determine the depreciation for each of the first Five years

a.      By the Straight Line Method

b.     By the Double Declining Balance Method

c.      By the Sum of years digits Method

Answer 1

SOLUTION- A                         STRAIGHT LINE METHOD

DEPRECIATION = COST OF ASSETS / USEFUL LIFE

              = 275000 / 10

               = 27500

SOLUTION-2                     DOUBLE DECLINING METHOD

DEPRECIATION= 2 * STRAIGHT LINE DEPRECIATION RATE

STRAIGHT LINE DEPRECIATION RATE =100% / 10

                                 = 10%

DEPRECIATION OF 1ST YEAR = 2*10% * 275000

                         = 55000

DEPRECIATION OF 2ND YEAR = 220000 * 2 * 10% = 44000

SIMILARLY THE DEPRECIATION CAN BE CALCULATED FOR THE REST OF THE 5 YEARS.

SOLUTION-3                    SUM OF THE YEAR DIGIT METHOD

DEPRECIATION EXPENSE= COST OF ASSETS * REMAINING VALUE OF ASSET / SUM OF YEAR DIGIT.