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An equipment has been purchased at initial cost of ₹160000 and has an estimated salvage value of ₹10000. The equipment has an estimated life of 5 years. The difference between the book values (in ₹, hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.
Correct answer is '20000'. Can you explain this answer?
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An equipment has been purchased at initial cost of 160000 and has an e...
Calculating the Book Values
The book value of an asset is the value of the asset recorded on the company's balance sheet after deducting accumulated depreciation. In this case, we need to calculate the book values at the end of the 4th year using both the straight-line method and the sum of years digit method of depreciation.
Straight-Line Method
The straight-line method of depreciation evenly allocates the cost of an asset over its useful life. To calculate the annual depreciation expense, we subtract the estimated salvage value from the initial cost and divide it by the useful life of the equipment.
Calculating Annual Depreciation Expense
Initial cost = $160,000
Salvage value = $10,000
Useful life = 5 years
Annual depreciation expense = (Initial cost - Salvage value) / Useful life
= ($160,000 - $10,000) / 5
= $150,000 / 5
= $30,000
Calculating Book Value at the End of the 4th Year using Straight-Line Method
Book value at the end of the 4th year = Initial cost - (Annual depreciation expense x Number of years)
= $160,000 - ($30,000 x 4)
= $160,000 - $120,000
= $40,000
Sum of Years Digit Method
The sum of years digit method allocates more depreciation in the early years of an asset's life and less depreciation in the later years. To calculate the annual depreciation expense using this method, we first need to calculate the sum of the digits of the useful life.
Calculating Sum of the Digits
Sum of the digits = (Useful life x (Useful life + 1)) / 2
= (5 x (5 + 1)) / 2
= (5 x 6) / 2
= 30 / 2
= 15
Calculating Annual Depreciation Expense
For each year, we multiply the book value at the beginning of the year by the fraction of the remaining sum of the digits.
Year 1: Fraction = (Useful life - Year + 1) / Sum of the digits
= (5 - 1 + 1) / 15
= 5 / 15
= 1/3
Depreciation Expense for Year 1: $160,000 x (1/3) = $53,333.33
Similarly, we can calculate the depreciation expense for each year using the sum of years digit method.
Calculating Book Value at the End of the 4th Year using Sum of Years Digit Method
Book value at the end of the 4th year = Initial cost - Sum of depreciation expenses for the first 4 years
= $160,000 - ($53,333.33 + $40,000 + $26,666.67)
= $160,000 - $120,000
= $40,000
Calculating the Difference
Finally, we can calculate the difference between the book values obtained at the end of the 4th year using
The book value of an asset is the value of the asset recorded on the company's balance sheet after deducting accumulated depreciation. In this case, we need to calculate the book values at the end of the 4th year using both the straight-line method and the sum of years digit method of depreciation.
Straight-Line Method
The straight-line method of depreciation evenly allocates the cost of an asset over its useful life. To calculate the annual depreciation expense, we subtract the estimated salvage value from the initial cost and divide it by the useful life of the equipment.
Calculating Annual Depreciation Expense
Initial cost = $160,000
Salvage value = $10,000
Useful life = 5 years
Annual depreciation expense = (Initial cost - Salvage value) / Useful life
= ($160,000 - $10,000) / 5
= $150,000 / 5
= $30,000
Calculating Book Value at the End of the 4th Year using Straight-Line Method
Book value at the end of the 4th year = Initial cost - (Annual depreciation expense x Number of years)
= $160,000 - ($30,000 x 4)
= $160,000 - $120,000
= $40,000
Sum of Years Digit Method
The sum of years digit method allocates more depreciation in the early years of an asset's life and less depreciation in the later years. To calculate the annual depreciation expense using this method, we first need to calculate the sum of the digits of the useful life.
Calculating Sum of the Digits
Sum of the digits = (Useful life x (Useful life + 1)) / 2
= (5 x (5 + 1)) / 2
= (5 x 6) / 2
= 30 / 2
= 15
Calculating Annual Depreciation Expense
For each year, we multiply the book value at the beginning of the year by the fraction of the remaining sum of the digits.
Year 1: Fraction = (Useful life - Year + 1) / Sum of the digits
= (5 - 1 + 1) / 15
= 5 / 15
= 1/3
Depreciation Expense for Year 1: $160,000 x (1/3) = $53,333.33
Similarly, we can calculate the depreciation expense for each year using the sum of years digit method.
Calculating Book Value at the End of the 4th Year using Sum of Years Digit Method
Book value at the end of the 4th year = Initial cost - Sum of depreciation expenses for the first 4 years
= $160,000 - ($53,333.33 + $40,000 + $26,666.67)
= $160,000 - $120,000
= $40,000
Calculating the Difference
Finally, we can calculate the difference between the book values obtained at the end of the 4th year using
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Community Answer
An equipment has been purchased at initial cost of 160000 and has an e...
Given :
Initial cost (Ci) 160000i C =
Salvage value (Cs) 10000S
n = Life of asset 5 year
Book value after 4th year by straight line method
Now, depreciation after mth year by sum of year digit method
Depreciation after 1 year (D1)
Book value after 1 year (B1) = 160000 − 50000 = 110000
Similarly we can calculate other depreciation and booked values
∴ Difference between value of straight line method and sum of years digit method
= 40000− 20000 = 20000
Initial cost (Ci) 160000i C =
Salvage value (Cs) 10000S
n = Life of asset 5 year
Book value after 4th year by straight line method
Now, depreciation after mth year by sum of year digit method
Depreciation after 1 year (D1)
Book value after 1 year (B1) = 160000 − 50000 = 110000
Similarly we can calculate other depreciation and booked values
∴ Difference between value of straight line method and sum of years digit method
= 40000− 20000 = 20000
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An equipment has been purchased at initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. Can you explain this answer?
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An equipment has been purchased at initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. 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 initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. 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 initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. Can you explain this answer?.
An equipment has been purchased at initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. 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 initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. 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 initial cost of 160000 and has an estimated salvage value of 10000. The equipment has an estimated life of 5 years. The difference between the book values (in , hm integer) obtained at the end of 4th year using straight line method and sum of years digit method of depreciation is________.Correct answer is '20000'. Can you explain this answer?.
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