On July 1, 2010. Sparks Company purchased for $2,160,000 snow-making equipment h

Question

On July 1, 2010. Sparks Company purchased for $2,160,000 snow-making equipment having an estimated useful life of 5 years with as estimated salvage value of $90,000. Depreciation is taken for the portion of the year the asset is used. Instructions Complete the form below by determining the depreciation expense and year-end book values for 2010 and 2011 using the sum-of-the-years'-digits method. double-declining balance method. Assume the company had used straight-line depreciation during 2010 and 2011. During 2012, the company determined that the equipment would be useful to the company for only one more year beyond 2012. Salvage value is estimated at $120,000. Compute the amount of depreciation expense for the 2012 income statement.

Explanation / Answer

2010

2011

Sum of the years Digits Method:

2010

2011

Equipment $2,160,000 $2,160,000 Less: Equmulated Depreciation 345000 897000 Year end book value $1,815,000 $1,263,000 Depreciation expenses for the year 345000 552000 Double Declining Balance Methode: Equipment $2,160,000 $2,160,000 Less: Equmulated Depreciation 414000 1076400 Year end book value $1,746,000 $1,083,600 Depreciation expenses for the year 414000 662400

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