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 99369 dollars and in addition it had to spend 10646 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).

Explanation / Answer

Total depreciable cost of furniture=Total Purchase Cost-Net Salvage Value= ($99369+$10646)-$1000=$109,015

As per the US ADS, furniture is a 7 year property. As the property was made functional in April 2000, we will use half-yearly convention.

Now the deprecation is to be calculated till June 2004, which means after 4 years of use.

First 4 depreciation rates are 14.29%, 24.49%, 17.49% and 12.49%.

Depreciation Value in 2001=$109015*14.29%,

Dep. Value in 2002=$109015*(1-0.1429)*24.49%,

Dep.Value in 2003=$109015*0.8571*(1-0.2449)*17.49%,and

Dep.Value in 2004=$109015*0.8571*0.7551*(1-0.1749)*12.49%=$7270.95

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