Hey ! What R u doing at this late hour !!

A firm purchased a 5 years' lease for $40,000 on first January. It decides to write off depreciation on the annuity method. Presuming the rate of interest to be 5% per annum.

Show the lease account for the first 3 years. Calculations are to be made to the nearest dollar.

Annuity Table

Amount required to write off $1 by the annuity method.

Years	3%	3.5%	4%	4.5%	5%
3	0.353530	0.359634	0.360349	0.363773	0.367209
4	0.269027	0.272251	0.275490	0.278744	0.282012
5	0.218355	0.221418	0.224627	0.227792	0.230975
6	0.184598	0.187668	0.190762	0.193878	0.197017
7	0.160506	0.163544	0.166610	0.169701	0.172820
8	0.142456	0.145477	0.148528	0.151610	0.154722

Solution:

courtesy: google.

According to the annuity table given above, the annual charge for depreciation reckoning interest at 5 percent p.a. would be:

230975 × 40,000 = $9,239

Lease Account

	Debit Side			Credit Side
Date		$	Date		$
1st Year			1st Year
Jan. 1	To Cash	40,000	Dec. 31	By Depreciation	9,239
Dec. 31	To Interest	2,000		By Balance c/d	32,761
		42,000			42,000
			Even at 11.30 at night, burning midnight oil, I was still perusing my Actuarial books bought in 1960s.

Hey !! What are You reading at this late hour !! It is already 12 o' 
clock midnight. Go to bed !!  

My wife shrieked !! 

 No Darling !! 

 I said: 

I want to recall and understand at least something 
before 4th August 2016.

I replied. 

Courtesy: google.