Question

A Kubota tractor acquired on January 8 at a cost of $85,000 has an estimated useful life of 10 years. Assuming that it will have no residual value. a. Determine the depreciation for each of the first two years by the straight-line method. First Year Second Year $ $ b. Determine the depreciation for each of the first two years by the double-declining-balance metho

Answer 1

Answer:

Depreciation expense using the straight line depreciation method:

Year 1 = $8500

Year 2 = $8500

Depreciation expense using the double declining method

Year 1 = $17,000

Year 2 = $13,600

Explanation:

Depreciation expense using the straight line depreciation method = cost of asset/ useful life

$85,000 / 10 = $8500

The depreciation expense each year would be $8,500.

Depreciation expense using the double declining method = Depreciation factor × cost of asset

Deprecation factor = 2 × (1 / useful life)

Depreciation factor = 2 / 10 = 1 / 5

Depreciation expense first year = 1/5 × 85,000 = $17,000

Net book value at the end of the first year =$85,000 - $17,000 = $68,000

Depreciation expense the second year = 1/5 × 68,000 = $13,600

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