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Depreciation calculation for Nyland Company

On July 1, 2004, Nyland Company purchased for $1,440,000,
snow-making equipment having an estimated useful life of 5 years
with an estimated salvage value of $60,000. Depreciation is taken
for the portion of the year the asset is used.

INSTRUCTIONS
(a) Complete the form below by determining the depreciation expense
and year-end book values for 2004 and 2005 using the

1. sum-of-the-years'-digits method.
2. double-declining-balance method.

Sum-of-the-Years'-Digits Method 2004 2005
??????????????????????????????? ?????????? ??????????
Equipment $1,440,000 $1,440,000

Less: Accumulated Depreciation ________ ________

Year-End Book Value ________ ________

Depreciation Expense for the Year ________ ________

Double-Declining-Balance Method
???????????????????????????????
Equipment $1,440,000 $1,440,000

Less: Accumulated Depreciation ________ ________

Year-End Book Value ________ ________

Depreciation Expense for the Year ________ ________

(b) Assume the company had used straight-line depreciation during
2004 and 2005. During 2006, the company determined that the
equipment would be useful to the company for only one more year
beyond 2006. Salvage value is estimated at $80,000. Compute the
amount of depreciation expense for the 2006 income statement.

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Solution Preview

On July 1, 2004, Nyland Company purchased for $1,440,000,
snow-making equipment having an estimated useful life of 5 years
with an estimated salvage value of $60,000. Depreciation is taken
for the portion of the year the asset is used.

INSTRUCTIONS
(a) Complete the form below by determining the depreciation expense
and year-end book values for 2004 and 2005 using the

1. sum-of-the-years'-digits method.

1 + 2 + 3 + 4 + 5 = 15

2004 5/15 x (1,440,000 - 60,000) x 6/12 = 230,000
2005 4/15 x (1,440,000 - 60,000) x 12/12 = 368,000

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Solution Summary

This solution is comprised of a detailed calculation to find depreciation expense for Nyland Company's snow-making equipment.

$2.19