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Depreciation by two methods
Cost of $68.000
residual value of $18,000 useful life of 10 years placed in service on 10/1 of current fiscal year which ends on 12/31 a determine the depreciation for the current fiscal year and for the following fiscal year by (a) straight-line method and (b) double-declining-balance method. |
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A: Straight line Depreciation method is: Cost less Salvage Value/ estimated service life ($68,000-18,000)/10 = $5,000 a year Being first year is a partial year then take the $5,000 X 3/12 (months used in the year) = $1,250. 2nd year is $5,000. B. Double declining balance: First you need to figure out the rate. 1/ Estimated Service Life, 1/10 = 10% X 2 = 20%. Next take the cost of $68,000 X 20% X 3/12 (number of months used in the year) = $3,400 Depreciation Expense for the First year. For the Second year take Cost - Depreciation = Remaining Book Value $68,000 - $3,400 = $64,600 Take the $64,600 X 20% = $12,920 for the second year. |
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