Name:
Marjorie Bowden
An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting
a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing
in the answer according to the rounding instructions.
Required
Compute the depreciation for 2010 and 2011 under each of the following methods:
1. Straight-line
2. Hours worked
3. Units of output
4. Sum-of-the-years'-digits
5. Double-declining-balance
6. 150%-declining-balance
Method
Method Calculation
Rate of Depreciation
2010
2011
(round to the nearest dollar)
1.
Straight-line:
$650,000
=
$32,500
32,500
32,500
20
per year
2.
Hours worked
$650,000
=
$6.50
29,250
35,750
100,000
per hour
3.
Units of output
$650,000
=
$0.68
27,200
40,800
950,000
per unit
4.
Sum-of-the-years'-digits:
20
=
0.1
61,905
58,810
210
2010 Rate
5.
Double Declining Balance
(Multiply the numerator by 2)
2
=
10.0%
70,000
63,000
20
per year
6.
150% declining balance
(Multiply the numerator by 1.5)
1.5
=
7.5%
52,500
48,563
20
per year
7. Compute the company's return on assets (net income divided by average total assets, as discussed in Chapter 6) for each
method for 2010 and 2011, assuming that income before depreciation is $100,000. For simplicity, use ending assets, and
2010
2011
2010
2011
$100,000 - CY Depr
$100,000 - CY Depr
$700,000 - CY Depr
$700,000 - (CY Depr + PY Depr)
(round to one decimal place)
Straight Line
$67,500
$67,500
10.1%
10.6%
667,500
635,000
Hours worked
$70,750
$64,250
10.5%
10.1%
670,750
635,000
Units of output
$72,800
$59,200
10.8%
9.4%
672,800
632,000
Sum-of-the-years' -digits
$38,095
$41,190
6.0%
7.1%
638,095
579,285
Double-declining balance
$30,000
$37,000
4.8%
6.5%
630,000
567,000
150%-declining balance
$47,500
$51,437
7.3%
8.6%
647,500
598,937
CY
=
Current Year
Depr = Depreciation
PY
=
Prior Year
P11-1
Depreciation Methods
ignore interest, income taxes, and other assets.
(round all percentages to one decimal place)
Formula for Return on
Total Assets
+(see below)
+
Legend: