also (not included in photo) Book Value 2 o the tract was depleted is valued at

ID: 1111062 • Letter: A

Question

also (not included in photo) Book Value

2 o the tract was depleted is valued at a total of $50,000 urvesica tiercloreS,bour2500d- Land is not considered depletable, only the timber, which Theretore the fint yar'sdopletion allowance would be o.20ss0,00) 10,000 11-13 mhe was purchased novo ycars ago for $000 and had a depreciable life of five years and no expected salvage value. The owner is considering an offer to sell the machine for $25,000. For each of the depreciation methods listed, fill in the table below to determine the deprecation for yer 2,and the book value a h end of year 2. (Assume a five-year MACRS recovery period) ear 2. (Assume a five-year MACRS recovery period.) Depreciation End of Year 2 For Year 2 Book Valuc Straigh -line (SL) Sum-of-years-digits (SOYD) Double declining balance (DDB) Modified accelerated cost recovery system (MACRS

Explanation / Answer

SOYD:-

SOYD = N(N+1)/2 = (5*6)/2 = 15
Depreciation year 1=(5/15)(50,000-0) =$16,666

Depreciation year 2=(4/15)(50,000-0) =$13333

Total Depreciation = $16666+$13333 = $30,000

Book Value = P – Total Depreciation =50000-30000 =$20,000

SL Method:-

Depreciation =(P-S)/N = (50000-0)/5 = 10000per year

Total depreciation =$10000*2 =$20000

Book Value = $50000-$20000=$30000

DDB Method:-

Depreciation year 1= 2(Book Value)/N = 2(50000)/5 = $20000

Depreciation Year 2= 2(Book Value)/N = 2(50000-20000)/5 = $12000

Total Depreciation=$32000

Book Value =$50000-$32000 = $18000

MACRS:=

Depreciation year 1=(20%)(50000) =$10000

Depreciation year 2=(32%)(50000) =$16000

Total Depreciation=$26000

Book Value = $50000-$26000=$24000

Depreciation for Year 2

End of Year 2 Book Value

Sum of Year Digits(SOYD)

13333

20000

Straight Line

10000

30000

Double Declining Balance

12000

18000

MACRS

16000

24000

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