1. Consider the depreciation of a $5,000 asset with $0 salvage value using both
ID: 2761348 • Letter: 1
Question
1. Consider the depreciation of a $5,000 asset with $0 salvage value using both the Straight Line and SOYD depreciation methods. Assume a 5-year depreciable life. Develop the complete depreciation schedules for the asset showing year-by-year depreciation charges and book values. What is the total present worth of the lifetime depreciation charges for each method? Use an interest rate of 8% per year.
be sure to include complete depreciation schedules showing year-by-year depreciation amounts and book values
Explanation / Answer
Depreciation Schedule under Straight line Method
Depreciation Expense = 5000-0/5 = $1000
Present Worth under straight line method = 4000/(1+0.08)^5 = $2722.33
Depreciation Schedule under SOYD
SYD = n(n+1)/2 = 5(5+1)/2 = 15
Present worth under SYOD = 5000/(1+0.08)^5 = $3402.92
Year Book Value Accumulated Depreciaition 1 5000 0 2 (5000-1000)=$4000 1000 3 (4000-1000) = $3000 1000 4 (3000-1000) = $2000 1000 5 (1000 -1000) = 0 1000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.