FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On July 1, 2020, Sport Company purchased for $3,600,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $150,000. Depreciation is taken for the portion of the year the asset is used.
Instructions
(a) Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the
- sum-of-the-years'-digits method.
- double-declining balance method.
Sum-of-the-Years'-Digits Method 2020 2021
Equipment $3,600,000 $3,600,000
Less:
Year-End Book Value _______ _______
Depreciation Expense for the Year _______ _______
Double-Declining Balance Method
Equipment $3,600,000 $3,600,000
Less: Accumulated Depreciation _______ _______
Year-End Book Value _______ _______
Depreciation Expense for the Year _______ _______
(b) Assume the company had used straight-line depreciation during 2020 and 2021. During 2022, the company determined that the equipment would be useful to the company for only one more year beyond 2022. Salvage value is estimated at $200,000.
(1) Compute the amount of depreciation expense for the 2022 income statement.
(2) What is the depreciation base of this asset?
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