Depreciation Methods Akron Incorporated purchased an asset on September 1 of Year 1 for $375,000. The estimated residual value is $15,000. Akron estimat Calculate the depreciation for Year 1 using the sum-of-the-years-digits method es that the asset has a service life of 5 years 40,000 Calculate the depreciation for Year 2 using the sum-of-the-years-digits method. 120,000X Check My k The sum-of-the-years'-digits method recognizes a dedlining depreciation expense each period by applying a decreasing fraction each year to the depreciable base of the asset. denominator of the fraction is the sum of the years of the asset's service-e. Therefore, for an asset with a 5-year life, the sun is S + 432 + i is. The numerator of th the number of years remaining in the asset's life as of the beginning of the year. Note that in this method, the deprecation base remains constant, while the fraction decreases When acquisition and disposal of assets occur throughout the year, you should record depreciation only for the portion of the year that the asset was used in the operation of th Accelerated depreciation methods allocate the annual amount of depreciation expense into adjacent fiscal years based on the number of months. Example If the sum-of-the-years'-digits depreciation method is used you should compute depreciation expense as follows: Fiscal Year Depreciation Expense Fiscal Annual Year Depreciation Months Computation 1 $3,000 4 4/12 x $3,000 $1,000 2 $2,000 12 (8/12 x $3,000) (4/12 x $2,000) $2,667 Depreciation Methods Albany Corporation purchased equipment on April 1 of Year 1 for $75,000. The asset does not have a residual value, and is estimated to be in service for 8 years. Calculate the depreciation for Year 1 using the double-dedining-balance method. Round to the nearest dollar. 14,063 V Calculate the deprecdation for Year 2 using the double-dedining-balance method. Round to the nearest dollar. 96,000 X Feedback Check My Work The dedining-balance methods recognize a declining depreciation expense amount each period by applying a constant rate to the book value of the asset at dedining balance depreciation rate is some multiple (m) of the straight-line rate: Declining Balance Depreciation RatemxStraight-Line Rate You should compute the depreciation expense for each period of an asset's life as follows: Deprecdiation ExpenseDedining Balance x Net Book Value at Depreciation Rate Beginning of Period You should note two important points: The periodic depreciation declines because the book value is used and not the depreciation base. Because you should ignore the residual value in the calculation of depreciation expense, the application of the declining balance m from its residual value at the end of the asset's servic life. Therefore, you should adjust depreciation expense toward the end of the asset's service ife so t residual value