Consider five depreciation schedules: Year A 1 $45.00 $35.00 $29.00 $58.00 $43.5

Question

Consider five depreciation schedules: Year A 1 $45.00 $35.00 $29.00 $58.00 $43.50 2 36.00 20.00 46.40 34.80 30.45 3 27.00 30.00 27.84 20.88 21.32 4 18.00 30.00 16.70 12.53 14.92 5 9.00 20.00 16.70 7.52 10.44 8.36 They are based on the same initial cost, useful life, and salvage value. Identify each schedule as one of the following . Straight-line depreciation Sum-of-years'-digits depreciation 150% declining balance depreciation .Double declining balance depreciation e Unit-of-production depreciation Modified accelerated cost recovery system

Explanation / Answer

A: Sum-of-years’-digits depreciation

B: Unit-of-production depreciation

C: Modified accelerated cost recovery system

D: Double declining balance depreciation

E: 150% declining balance depreciation

Workings:

Cost = $145; Depreciable cost = $135; Useful life = 5 years;

; 150% DDB rate = 30%

A: $135 / 15 X 5 = $45; $135 / 15 X 4 = $36 and so on

C: Depreciation is charged at the rates of 20%, 32%, 19.20%, 11.52%, 11.52%, 5.76%

D: DDB rate of depreciation = 100% / 5 x 200% = 40%

$145 x 40% = $58; ($145 - $58) x 40% = $34.8 and so on

E: 150% DDB rate = 100% / 5 x 150% = 30%

$145 x 30% = $43.50; ($145 – 43.50) x 30% = $30.45 and so on

B: Is not straight-line depreciation since the depreciation charge for each year is not the same and hence it is unit-of-production.

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