Question

Bayside Coatings Company purchased waterproofing equipment on January 2, 20Y4, for $190,000. The equipment was expected to have a useful life of four years and a residual value of $9,000. Instructions: Determine the amount of depreciation expense for the years ended December 31, 20Y4, 20Y5, 20Y6, and 20Y7, by (a) the straight-line method and (b) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method. Depreciation Expense Year Straight-Line Method Double-Declining-Balance Method 20Y4 $ $ 20Y5 20Y6 20Y7 Total $

Answer 1

Answer & Explanation:

Straight Line table

$\left[\begin{array}{cccc}Year&dep \: expense&acc \: dep&net\: book \: value\\0&-&-&190,000\\1&45,250&45,250&144,750\\2&45,250&90,500&99,500\\3&45,250&135,750&54,250\\4&45,250&181,000&9,000\\\end{array}\right]$

The straight-line Method is simply and easy to understand, It distribute the depreciation equally between years. So that implies that the formula should be:            

$\frac{Adquisition \: Value- \: Salvage \: Value}{useful \: life}= Depreciation \: coplete \: year$            

195,000 - 9,000 = 181,000

181,000 / 4 = 45,250

Double Declining table

$\left[\begin{array}{cccc}Year&Dep \: Exp&Acc \: Dep&Ending \:Book \:Value\\0&-&-&190,000\\1&95,000&95,000&95,000\\2&47,500&142,500&47,500\\3&23,750&166,250&23,750\\4&14,750&181,000&9,000\\\end{array}\right]$

The Double declining  You double the straight line rate

$\frac{1}{useful \: life} \times 2 = DD \: rate \\\\(1/4) \times 2 = 1/2$

Current Book Value x rate = depreciation expense

190,000 x 1/2 = 95,000