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Makovka662 [10]

3 years ago

13

Use straight line (SL) depreciation to determine a. annual depreciation charge (5 points) and b. annual book values for the life

of the asset having the price of $1,900,000, depreciable life of 10 years, and the salvage value of $600,000. (10 points)

1 answer:

LenaWriter [7]3 years ago

7 0

Answer:

(a) $130,000

Explanation:

Given that,

Previous year book value = $1,900,000

Depreciable life = 10 years

Salvage value = $600,000

(a) Annual depreciation charge:

= (Book value - Salvage value) ÷ Depreciable life

= (1,900,000 - 600,000) ÷ 10

= $130,000

(b) Annual book value:

= Previous year book value - Current year depreciation amount

For year 0,

Annual book value = $1,900,000

For year 1,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,900,000 - $130,000

= $1,770,000

For year 2,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,770,000 - $130,000

= $1,640,000

For year 3,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,640,000 - $130,000

= $1,510,000

For year 4,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,510,000 - $130,000

= $1,380,000

For year 5,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,380,000 - $130,000

= $1,250,000

For year 6,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,250,000 - $130,000

= $1,120,000

For year 7,

Annual book value:

= Previous year book value - Current year depreciation amount

= $1,120,000 - $130,000

= $990,000

For year 8,

Annual book value:

= Previous year book value - Current year depreciation amount

= $990,000 - $130,000

= $860,000

For year 9,

Annual book value:

= Previous year book value - Current year depreciation amount

= $860,000 - $130,000

= $730,000

For year 10,

Annual book value:

= Previous year book value - Current year depreciation amount

= $730,000 - $130,000

= $600,000

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