1. DECLINING-BALANCE METHOD OF DEPRECIATION
Plant asset: Computer Original cost: $2,000.00
Depreciation method: Declining balance Estimated salvage value: $175.00
Estimated useful life: 5 years
Beginning Declining- Annual Ending
Year Book Value Balance Rate Depreciation Book Value
1 $2, % $ $1,200.00
2 1, % % % %
1. Calculate the declining-balance rate.
Total Depreciation Expense %
 Estimated Useful Life (years)  5
= Straight-Line Rate %
 Double the Rate  2
= Declining-Balance Rate % 1 2
2. Calculate the annual depreciation for year 3.
Beginning Book Value $720
 Depreciation Rate  40%
= Annual Depreciation Expense $288
Total ————
Depreciation — $1, —
Lesson 8-4, page 234

2. SUM-OF-THE-YEARS-DIGITS METHOD OF DEPRECIATION
Plant asset: Computer Original cost: $2,000.00
Depreciation method: Sum-of-the-years-digits Estimated salvage value: $175.00
Estimated useful life: 5 years
Beginning Total Annual Ending
Year Book Value Fraction Depreciation Depreciation Book Value
1. Calculate the fraction.
Years’ Digits Fraction
1 5/15
2 4/15
3 3/15
4 2/15
5 1/15
Total 15 1
1 $2, /15 $1, $ $1,391.67
2 1, /15 $1,
/15 $1,
/15 $1,
/15 $1,
2. Calculate the annual depreciation for year 1.
Original Cost $2,000.00
Estimated Salvage Value –
Estimated Total Depreciation $1,825.00
Year’s Fraction  5/15
Annual Depreciation $608.33 2
Total — ———
Depreciation $1,825.00
Lesson 8-4, page 235

3. COMPARISON OF THREE METHODS OF DEPRECIATION
Plant asset: Computer Original cost: $2,000.00
Depreciation method: Comparison Estimated salvage value: $175.00
Estimated useful life: 5 years
Straight-Line Double Declining-Balance Sum-of-the-Years-Digits
Year Method Method Method
1 $ $ $
Total Depreciation $1, $ $1,825.00
Lesson 8-4, page 236

4. PRODUCTION-UNIT METHOD OF DEPRECIATION
Plant asset: Truck
Depreciation method: Production-unit Estimated total depreciation: $16,200.00
Original cost: $18, Estimated useful life: 90,000 miles
Estimated salvage value: $2, Depreciation rate: $0.18 per mile driven
Beginning Miles Annual Ending
Year Book Value Driven Depreciation Book Value
1. Calculate the depreciation rate.
Original Cost $18,200
– Estimated Salvage Value – 2,000
= Est. Total Depreciation Expense $16,200
 Estimated Useful Life (miles)  90,000
= Depreciation Rate $0.18/mile 1 2
2. Calculate annual depreciation for year 1.
Total Miles Driven 9,000
 Depreciation Rate  $0.18
= Annual Depreciation Exp. $1,620.00
1 $18, ,000 $ 1, $ 16,580.00
2 16, ,000 4, ,440.00
3 12, ,000 4, ,940.00
4 7, ,000 3, ,980.20
5 3, , , ,540.00
Totals 87,000 $15,600.00
Lesson 8-4, page 237

5.     CALCULATING DEPRECIATION EXPENSE FOR INCOME TAX PURPOSES
Plant asset: Printer Original cost: $2,000.00
Depreciation method: MACRS Property class: 5 year
Year Depreciation Rate Annual Depreciation
% $400.00 % % % % %
Totals % $2,000.00    
Lesson 8-4, page 238

6. TERMS REVIEW declining-balance method of depreciation
sum-of-the-years-digits method of depreciation
production-unit method of depreciation
Modified Accelerated Cost Recovery System
depletion
Lesson 8-4, page 240