Straight-Line, Declining-Balance, and Sum-of-the-Years'-Digits Methods A light truck is purchased on January 1 at a cost of $38,730. It is expected to serve for eight years and have a salvage value of $5,690. Calculate the depreciation expense for the first and third years of the truck’s life using the following methods. If required, round your answers to the nearest cent. Depreciation Expense Year 1 Year 3 1. Straight-line $ $ 2. Double-declining-balance $ $ 3. Sum-of-the-years'-digits $ $
Depreciation Expense Year 1 Year 3 1. Straight-line $4,130 $ 4,130 2. Double-declining-balance $ 9,682. 50 $ 5446. 41 3. Sum-of-the-years'-digits $7342. 22 $ 5506. 67 Working Straight line Method A Cost $ 38,730. 00 B Residual Value $ 5,690. 00 C=A - B Depreciable base $ 33,040. 00 D Life [in years left ] 8 E=C/D Annual SLM depreciation $ 4,130. 00 Depreciation schedule-Straight line method Year Book Value Depreciation expense Accumulated Depreciation Ending Book Value 1 $ 38,730. 00 $ 4,130. 00 $ 4,130. 00 $ 34,600. 00 2 $ 34,600. 00 $ 4,130. 00 $ 8,260. 00 $ 30,470. 00 3 $ 30,470. 00 $ 4,130. 00 $ 12,390. 00 $ 26,340. 00 Double declining Method A Cost $ 38,730. 00 B Residual Value $ 5,690. 00 C=A - B Depreciable base $ 33,040. 00 D Life [in years] 8 E=C/D Annual SLM depreciation $ 4,130. 00 F=E/C SLM Rate 12. 50% G=F x 2 DDB Rate 25. 00% Depreciation schedule-Double declining Year Beginning Book Value Depreciation rate Depreciation expense Accumulated Depreciation Ending Book Value 1 $ 38,730. 00 25. 00% $ 9,682. 50 $ 9,682. 50 $ 29,047. 50 2 $ 29,047. 50 25. 00% $ 7,261. 88 $ 16,944. 38 $ 21,785. 63 3 $ 21,785. 63 25. 00% $ 5,446. 41 $ 22,390. 78 $ 16,339. 22 Sum-of-the-Years'-Digits Method A Cost $ 38,730. 00 B Residual Value $ 5,690. 00 C=A - B Depreciable base $ 33,040. 00 Sum of digits with 5 years (8+7+6+5+4+3+2+1) 36 Year Depreciable base Formula Depreciation expense 1 $ 33,040. 00 (([33040x8/36]/) $ 7,342. 22 2 $ 33,040. 00 (([33040x7/36]/) $ 6,424. 44 3 $ 33,040. 00 (([33040x6/36]/) $ 5,506.67
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