Company Zeta bought new office furniture in the year 2000. The purchase cost was

Question

Company Zeta bought new office furniture in the year 2000. The purchase cost was 97972 dollars and in addition it had to spend 13926 dollars for installation. The furniture has been in use since April 21st, 2000. Zeta forecasted that in 2015 the office furniture would have a net salvage value of $1000. Using the US Accelerated Depreciation Schedule, estimate the value of depreciation recorded in the accounting books in the year 2004 if the company decided to sell the furniture on June 5th (of 2004). (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)

CORRECT ANSWER: 4996.25

Explanation / Answer

According to my calculations,

Accelarated Depreciation Percentage = ((cost of asset - salvage value) / years of useful life) x 2

So, 111898/15 * 2 = 14919.73

Company Zeta depreciation expense under the Accelarated Depreciation method is $111898 x 13.33333% = $14919.73. Company Zeta is essentially expensing 13.33333% of the asset's cost in the first year, and in each subsequent year it will multiply that 13.33333% by the remaining balance to be depreciated

2000 - First Year Depreciation would be Cost of Furniture which included installation will be 111898*13.33333% *(255 (Number of days)/365) = 10423.37 (From Apr 21 to Dec 31 2000)

2001 - Second Year Depreciation would be 111898-10423.37 *13.33333% = 13529.94

2002 - Third year Depreciation would be 111898-10423.37 -13529.94*13.33333% = 11725.95

2003 - Fourth Year Depreciation would be 111898-10423.37 -13529.94-11725.95*13.33333% = 10162.49

2004 - Fifth Year Depreciation would be 111898-10423.37 -13529.94-11725.95-10162.49*13.33333%*(155(Number of Day/365) = 3740.16

So, as of June 5th 2004 the Value of Depreciation would be 3740.16

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