On January 4, 2016, Chicago Company purchased new equipment for $600,000 that had a useful life of

Question:

On January 4, 2016, Chicago Company purchased new equipment for $600,000 that had a useful life of four years and a salvage value of $60,000.

INSTRUCTIONS

Prepare a schedule showing the annual depreciation and end-of-year accumulated depreciation for the first three years of the asset's life under

(1) The straight-line method,

(2) The sum-of-the-years'-digits method, and

(3) The double-declining-balance method.

Analyze: If the sum-of-the-years'-digits method is used to compute depreciation, what would be the book value of the asset at the end of 2017?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...