What Depreciation method to use

The Haynes Company takes a full year’s depreciation expense in the acquisition year and no depreciation in the disposal year. The following information is given on a depreciable asset: Acquisition date 1/1/X3 Estimated useful life 5 years Residual value $ 20,000 Cost 110,000 Accumulated depreciation as of 12/31/X3 30,000 What is the depreciation expense for year 2 based on the above information? a. 18000 b. 22000 c. 24000 d. 30000 I got the answer of this but took 3 minutes to get it (using hit and trial) How do we determine what depreciation method to use? Correct answer id 24000.

what trial and error method did you apply and how? whats the cost of the asset once you acquired it and how much are you depreciating over 5 yrs? 90k? or 60k?

In 1 year has a depreciation of 30,000, the asset is depreciated for 4 years (no depreciation in the last year, but has a salvage value of 20,000. It cannot be straight line, has to be an accelerated depreciation. SOYD: (Cost-Salvage)*years remaining/sum of years digit=90*5/15=30, so we found it. SOYD next year: 90*4/15=24000, C.

Calculated depreciation using SYD/DDB for 1 yr depreciation to match up with 30000 Cost $110,000 Question asked for 2 yr depreciation so did not calculate for 5 yrs though.

Thanks map1

wow FSA. you really ahve to go over this stuff few times before it makes sense.

hmm, it looks easy we need to allocate 90,000 for 5 years and we know that the first pmt = 30,000 --> it’s not SLM DDB: 2/5*90,000 = 36,000 --> it’s not DDB SYD: 90,000 * (5-1+1)/5 = 30,000 --> here it is!

gogiants Wrote: ------------------------------------------------------- > > DDB: 2/5*90,000 = 36,000 --> it’s not DDB > why are you doing it over 90k? do it at your book value, which is 80k after first’s year of depreciation .4 x 80 = 32k

DDB is at Book value, so year 1 would be 110,000*2/5=44, the following year would have deducted the depreciation from the book value of the asset and multiply by the same 2/5. Either one of the accelerated methods: be carefull not to depreciate more than permited (whenever there is a salvage value, leave it in the book value at the end of the depreciation).

DDM: my bad … and i know it cold but somehow put different figure. Hate these mistakes