Question 3
On July 1, 2023, Francis Company purchased for $2,160,000 snow-making equipment having an
estimated useful life of 5 years with an estimated salvage value of $90,000. 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 2023 and 2024 using the
i. sum-of-the-years'-digits method.
ii. double-declining balance method.
Sum-of-the-Years'-Digits Method
2023
$2,160,000
2024
$2,160,000
Equipment
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year
Double-Declining Balance Method
Equipment
$2,160,000
$2,160,000
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year
b. Assume the company had used straight-line depreciation during 2023 and 2024. During
2025, the company determined that the equipment would be useful to the company for
only one more year beyond 2025. Salvage value is estimated at $120,000. Compute the
amount of depreciation expense for the 2025 income statement.