Answer:
a. Straight Line Method Depreciation= $ 2400
b. MACRS
c. Sum-of-Years' Digits
Explanation:
a. Straight Line Method Depreciation=
Purchase Cost- Salvage Value/ No of useful life *depreciation rate
=$ 150,000- $30,000/10 * 20%
=120,000/10* 20%= 12000* 20/100=$ 2400
b. MACRS
Since it is a non-form 10-year property, the company can elect to use either the 150% or 200% declining balance method.
Depreciation in 1st Year =
Cost × 1/Useful Life × A × Depreciation Convention
Depreciation in Subsequent Years =
(Cost − Depreciation in Previous Years) × 1/ Recovery Period × A
Where,
A is 100% or 150% or 200%.
Depreciation for the the first year $ 150,000/10 *200%= $30,000
Depreciation for the the 2nd year =$ 150,000-30,000/10 *200%= $24,000
Depreciation for the the third year =$ 150,000-30,000- 24000/10 *200%
=$ 19,200
Depreciation for the the 4th year $ 150,000-30,000-24000-19200/10 *200%= Note A
Note A: MACRS declining balance changes to straight-line method when that method provides an equal or greater deduction. Deduction under 200% declining balance MACRS for 4th year would be $ 153,600 ($150000 - $30,000 - $24000 - $19200 × 1/10 × 200%. This is greater than depreciation under straight line method .
c. Sum-of-Years' Digits Method Depreciation
Depreciation Amount = Acquisition Cost - Salvage Value = $ 120,000
Sum of useful life= 10+9+8+7+6+5+4+3+2+1= 55
Depreciation Factor = 10/55, 9/55, 8/55, 7/55 etc.
Depreciation for the 1st year= 10/55* 120,000= $ 21,818.2
Depreciation for the 2nd year= 9/55* 120,000= $ 19 636.4
Depreciation for the 3rd year= 8/55* 120,000= $17,546
Depreciation for the 4th year= 7/55* 120,000= $ 15,273
Depreciation for the 5th year= 6/55* 120,000= $ 13,091
Depreciation for the 6th year= 5/55* 120,000= $ 10,909.1
Depreciation for the 7th year= 4/55* 120,000= $ 8727.3
Depreciation for the 8th year= 3/55* 120,000= $ 6545.5
Depreciation for the 9th year= 2/55* 120,000= $4363.63
Depreciation for the 10th year= 1/55* 120,000= $ 2181.81
