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Nady [450]
3 years ago
13

Sandblasting equipment acquired at a cost of $42,000 has an estimated residual value of $6,000 and an estimated useful life of 1

0 years. It was placed in service on October 1 of the current fiscal year, which ends on December 31, 20Y5.
a. Determine the depreciation for 20Y5 and for 20Y6 by the straight-line method.

Depreciation
20Y5 $ 900
20Y6 $ 3600
b. Determine the depreciation for 20Y5 and for 20Y6 by the double-declining-balance method.

Depreciation
20Y5 $
20Y6 $
Business
1 answer:
andreyandreev [35.5K]3 years ago
7 0

Answer:

a. Depreciation

20Y5 $900

20Y6 $3600

b. Depreciation

20Y5 $2,100

20Y6 $7,980

Explanation:

The computation of the depreciation expense for the second year is shown below:

a) Straight-line method:

= (Original cost - residual value) ÷ (useful life)

= ($42,000 - $6,000) ÷ (10 years)

= ($36,000) ÷ (10 years)

= $3,600

In year 20Y5 the equipment is purchased on October 1 and we have to calculated till December 31. So, 3 months depreciation should be charged in year 1

= $3,600 × (3 months ÷ 12 months)

= $900

And in year 20Y6, the depreciation expense is $3,600

In this method, the depreciation is same for all the remaining useful life

(b) Double-declining balance method:

First we have to find the depreciation rate which is shown below:

= Percentage ÷ useful life

= 1 ÷ 10

= 10%

Now the rate is double So, 20%

In year 20Y5 , the original cost is $42,000, so the depreciation is $ 8,400 after applying the 50% depreciation rate. This is full month depreciation but we have to find for only 3 months.

So, $8,400 × (3 months ÷ 12 months)

= $2,100

And, in year 20Y6, the depreciation expense would be

=  ($42,000 - $2,100) × depreciation rate

= $39,900 ×20%

= $7,980

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