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An equipment has been purchased at an initial cost of 1,60,000 and has an estimated salvage value of 10,000. The equipment has an estimated life of 5 years. The difference between the book values (in', in integer) obtained at the end of 4th year using straight-line method and sum of years digit method of depreciation is _________.
Correct answer is '20,000'. Can you explain this answer?
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An equipment has been purchased at an initial cost of 1,60,000 and ha...
Calculation of Book Values using Different Depreciation Methods:
- Straight-Line Method:
- Annual Depreciation = (Initial Cost - Salvage Value) / Useful Life
- Annual Depreciation = (1,60,000 - 10,000) / 5 = 30,000
- Book Value at the end of 4th year = Initial Cost - (Annual Depreciation * Number of Years)
- Book Value at the end of 4th year = 1,60,000 - (30,000 * 4) = 40,000
- Sum of Years Digit Method:
- Total Depreciation = (Useful Life * (Useful Life + 1)) / 2
- Depreciation for each year:
- Year 1: 5/15 * (1,60,000 - 10,000) = 30,000
- Year 2: 4/15 * (1,60,000 - 10,000) = 24,000
- Year 3: 3/15 * (1,60,000 - 10,000) = 18,000
- Year 4: 2/15 * (1,60,000 - 10,000) = 12,000
- Year 5: 1/15 * (1,60,000 - 10,000) = 6,000
- Book Value at the end of 4th year = Initial Cost - (Depreciation for year 1 + Depreciation for year 2 + Depreciation for year 3 + Depreciation for year 4)
- Book Value at the end of 4th year = 1,60,000 - (30,000 + 24,000 + 18,000 + 12,000) = 76,000
Difference in Book Values:
- Difference = Book Value using Straight-Line Method - Book Value using Sum of Years Digit Method
- Difference = 40,000 - 76,000 = 20,000
Therefore, the difference between the book values obtained at the end of the 4th year using the straight-line method and the sum of years digit method of depreciation is 20,000.
- Straight-Line Method:
- Annual Depreciation = (Initial Cost - Salvage Value) / Useful Life
- Annual Depreciation = (1,60,000 - 10,000) / 5 = 30,000
- Book Value at the end of 4th year = Initial Cost - (Annual Depreciation * Number of Years)
- Book Value at the end of 4th year = 1,60,000 - (30,000 * 4) = 40,000
- Sum of Years Digit Method:
- Total Depreciation = (Useful Life * (Useful Life + 1)) / 2
- Depreciation for each year:
- Year 1: 5/15 * (1,60,000 - 10,000) = 30,000
- Year 2: 4/15 * (1,60,000 - 10,000) = 24,000
- Year 3: 3/15 * (1,60,000 - 10,000) = 18,000
- Year 4: 2/15 * (1,60,000 - 10,000) = 12,000
- Year 5: 1/15 * (1,60,000 - 10,000) = 6,000
- Book Value at the end of 4th year = Initial Cost - (Depreciation for year 1 + Depreciation for year 2 + Depreciation for year 3 + Depreciation for year 4)
- Book Value at the end of 4th year = 1,60,000 - (30,000 + 24,000 + 18,000 + 12,000) = 76,000
Difference in Book Values:
- Difference = Book Value using Straight-Line Method - Book Value using Sum of Years Digit Method
- Difference = 40,000 - 76,000 = 20,000
Therefore, the difference between the book values obtained at the end of the 4th year using the straight-line method and the sum of years digit method of depreciation is 20,000.
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Community Answer
An equipment has been purchased at an initial cost of 1,60,000 and ha...
By straight line method
Book value after 6th year = 
= 40,000
By sum of year digit method,
Depreciation after mth year:
Depreciation after 1 year:
Di = 50,000
Book value after 1 year (B1) = 1,60,000 - 50,000 = 1,10,000
D2 = (1,60,000 - 10,000) × 4/15 = 40,000
B2 = 1,10,000 - 40,000 = 70,000
D3 = (1,60,000 - 10,000) × 3/15 = 30,000
B3 = 70,000 - 30,000 = 40,000
D4 = (1,60,000 - 10,000) × 2/15 = 20,000
B4 = 40,000 - 20,000 = 20,000
Difference between value of straight line method and sum of years digit method:
= 40,000 - 20,000 = 20,000
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An equipment has been purchased at an initial cost of 1,60,000 and has an estimated salvage value of 10,000. The equipment has an estimated life of 5 years. The difference between the book values (in', in integer) obtained at the end of 4th year using straight-line method and sum of years digit method of depreciation is _________.Correct answer is '20,000'. Can you explain this answer?
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An equipment has been purchased at an initial cost of 1,60,000 and has an estimated salvage value of 10,000. The equipment has an estimated life of 5 years. The difference between the book values (in', in integer) obtained at the end of 4th year using straight-line method and sum of years digit method of depreciation is _________.Correct answer is '20,000'. Can you explain this answer? for Civil Engineering (CE) 2024 is part of Civil Engineering (CE) preparation. The Question and answers have been prepared according to the Civil Engineering (CE) exam syllabus. Information about An equipment has been purchased at an initial cost of 1,60,000 and has an estimated salvage value of 10,000. The equipment has an estimated life of 5 years. The difference between the book values (in', in integer) obtained at the end of 4th year using straight-line method and sum of years digit method of depreciation is _________.Correct answer is '20,000'. Can you explain this answer? covers all topics & solutions for Civil Engineering (CE) 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An equipment has been purchased at an initial cost of 1,60,000 and has an estimated salvage value of 10,000. The equipment has an estimated life of 5 years. The difference between the book values (in', in integer) obtained at the end of 4th year using straight-line method and sum of years digit method of depreciation is _________.Correct answer is '20,000'. Can you explain this answer?.
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