accounting queston 1

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

i am stuck on the last part of this problem. year 5. every number i have come  up comes up wrong. 3369.60,3369,3370. please help. here is a pic of the problem

http://imgur.com/KpWMMYt

Mar 4th, 2015

For straight line depreciation, basically you have to divide the depreciable amount with the useful life. The depreciable amount is equal to purchase price minus the salvage value. Here's the solution:


Annual depreciation = ($65,000 - $5,000) / 5 years

                                 = $60,000 / 5 years

                                 = $ 12,000  


For double declining balance depreciation, you have to get the percentage that will be used for the annual depreciation. The formula would be 1 / useful life * 2. So our percentage would be to 1/5*2 = 40%. Then to get the annual depreciation, you have to multiply this percentage to the carrying amount of the asset. The carrying amount is equal to cost minus accumulated deprecation. Here's the solution.

Year 1: $65,000 * 40%                                   = $26,000

Year 2: $65,000 - $26,000 = $39,000 * 40% = $15,600

Year 3: $39,000 - $15,600 = $23,400 * 40% = $9,360

Year 4: $23,400 - $9,360 = $14,040 * 40%   = $5,616

Year 5: $14,040 - $5,616 - $5,000                 = $3,424

Please note that in year 5, you have to simply deduct the salvage value with the remaining carrying amount to get the depreciation.

Hope this had helped you.  


Mar 5th, 2015

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