Answer:
Swifty Company
1. Sum-of-the-years'-digits method:
2020 2021
Equipment $6,120,000 $6,120,000
Less: Accumulated Depreciation 977,500 2,541,500
Year-End Book Value $5,143,500 $3,578,500
Depreciation Expense for the Year 977,500 $1,564,000
2. Double-declining balance method:
2020 2021
Equipment $6,120,000 $6,120,000
Less: Accumulated Depreciation 1,224,000 3,182,400
Year-End Book Value $4,896,000 $2,937,600
Depreciation Expense for the Year 1,224,000 $1,958,400
Straight-line Method:
3. The amount of depreciation expense for the 2022 income statement is:
= $2,170,250.
4. In 2022, the depreciation base of this asset is:
= $4,020,500
Explanation:
a) Data and Calculations:
July 1, 2020: Cost of snowmaking equipment = $6,120,000
Estimated salvage value of the equipment = 255,000
Depreciable amount of the equipment = $5,865,000
Estimated useful life of the equipment = 5 years
Annual depreciation expense = $1,173,000 ($5,865,000/5)
Sum-of-the-Years'-Digits Method =15 (5+4+3+2+1)
Calculation of depreciation expense:
2020 = $977,500 (5/15 * $5,865,000)/2
2021 = $1,564,000 (4/15 * $5,865,000)
2020 2021
Equipment $6,120,000 $6,120,000
Less: Accumulated Depreciation 977,500 2,541,500
Year-End Book Value $5,143,500 $3,578,500
Depreciation Expense for the Year 977,500 $1,564,000
Double-Declining Balance Method (100/5 * 2) = 40%
Calculation of depreciation expense:
2020 = $1,224,000 (40% * $6,120,000)/2
2021 = $1,958,400 (40% * $4,896,000)
2020 2021
Equipment $6,120,000 $6,120,000
Less: Accumulated Depreciation 1,224,000 3,182,400
Year-End Book Value $4,896,000 $2,937,600
Depreciation Expense for the Year 1,224,000 $1,958,400
Straight-line method:
Annual depreciation expense = $1,173,000
2020: Depreciation expense = $586,500
2021: Depreciation expense = $1,173,000
2022: Depreciable amount = $4,340,500 ($4,360,500 - $20,000)
Depreciation expense = $2,170,250 ($4,340,500/2)
2020 2021 2022
Equipment $6,120,000 $6,120,000 $6,120,000
Less: Accumulated Depreciation 586,500 1,759,500 3,929,750
Year-End Book Value $5,533,500 $4,360,500 $2,190,250
Depreciation Expense for the Year 586,500 1,173,000 2,170,250
Straight-line method:
Annual depreciation expense = $1,173,000
2020: Depreciation expense = $586,500
2021:
Depreciation expense = $1,173,000
Accumulated depreciation = $1,759,500 ($586,500 + $1,173,000)
Year-End Book Value $4,360,500 ($6,120,000 - $1,759,500)
2022 Estimated Salvage Value = $340,000
2022: Depreciation basis = $4,020,500 ($4,360,500 - $340,000)
Depreciation expense = $2,010,250 ($4,020,500/2)