Chapter 11, Problem 11.20E

To determine

Straight-line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

$\text{Depreciation = }\frac{\left(\text{Cost of the asset}-\text{Residual value}\right)}{\text{Estimated useful life of the asset}}$

Sum of the years’ digits method (SYD Method):

Sum-of-the years’ digits method determines the depreciation expense by multiplying the depreciable base and declining fraction.

$\begin{array}{c}\text{Depreciation}\text{expense=}\frac{\text{Cost of the asset }\times \left(\begin{array}{l}\text{Number of years of}\\ \text{estimated life remaining }\\ \text{at the beginning of the year}\end{array}\right)}{\text{SYD}}\begin{array}{l}\hfill \end{array}\\ \text{SYD}\text{=}\frac{\text{n}\left(\text{n+1}\right)}{\text{2}}\end{array}$

Where n is estimated life time of the asset.

To Prepare: The journal entry to record depreciation for 2016.