Asset depreciation and disposition. Answer each of the following questions. SHOW
ID: 2391520 • Letter: A
Question
Asset depreciation and disposition.
Answer each of the following questions. SHOW YOUR WORK.
1. A plant asset purchased for $500,000 has an estimated life of 10 years and a residual value of $25,000. Depreciation for the second year of use, determined by the declining-balance method at twice the straight-line rate is $_____________.
2. A plant asset purchased for $440,000 at the beginning of the year has an estimated life of 5 years and a residual value of $40,000. Depreciation for the third year, determined by the sum-of-the-years'-digits method is $______________.
3. A plant asset with a cost of $540,000, estimated life of 5 years, and residual value of $90,000, is depreciated by the straight-line method. This asset is sold for $380,000 at the end of the second year of use. The gain or loss on the disposal (indicate by "G" or "L") is $___________.
Explanation / Answer
1
Particulars
$
cost of the Plant asset
500000
estimated useful life
10 years
Depreciation
50000
Rate as per slm
10%
Rate as per WDV
20%
Depreciation as per WDV
$
1 YEAR (500000*20%)
100000
2 YEAR (300000*20%)
60000
2
Depreciation as per sum of years digit method
(440,000-40000)*3/15
80000
3
Particulars
$
Cost of plant asset
540000
estimated useful life
5 years
Residual value
90000
Depreciation
(540000-90000)/5
$ 90,000
Depreciation for two year
180000
WDV of the asset
(540000-180000)
360000
Sale value of asset
380000
Gain
20000
1
Particulars
$
cost of the Plant asset
500000
estimated useful life
10 years
Depreciation
50000
Rate as per slm
10%
Rate as per WDV
20%
Depreciation as per WDV
$
1 YEAR (500000*20%)
100000
2 YEAR (300000*20%)
60000
2
Depreciation as per sum of years digit method
(440,000-40000)*3/15
80000
3
Particulars
$
Cost of plant asset
540000
estimated useful life
5 years
Residual value
90000
Depreciation
(540000-90000)/5
$ 90,000
Depreciation for two year
180000
WDV of the asset
(540000-180000)
360000
Sale value of asset
380000
Gain
20000
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