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svetlana [45]
3 years ago
10

Sooner Machinery Company purchased a delivery truck at a cost of $56,000 on March 10, 2018. The truck has a useful life of six y

ears with an estimated salvage value of $5,000. Compute the annual depreciation for the first two calendar years using
a. The straight-line method.
b. The 150% declining-balance method.
Business
1 answer:
Fofino [41]3 years ago
4 0

Answer:

Results are below.

Explanation:

Giving the following information:

Purchase price= $56,000

Useful life= 6 yearsd

Salvage value= $5,000

<u>a. To calculate the annual depreciation, we need to use the following formula:</u>

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (56,000 - 5,000) / 6= $8,500

<u>Year 1</u>:

Annual depreciation= (8,500/12)*10= $7,083.33

<u>Year 2:</u>

Annual depreciation= $8,500

<u>b. To calculate the annual depreciation, we need to use the following formula:</u>

Annual depreciation= 1.5*[(book value)/estimated life (years)]

<u>Year 1:</u>

Annual depreciation= [(1.5*8,500)/12]*10= $10,625

<u>Year 2:</u>

Annual depreciation= [(51,000 - 10,625)/6]*1.5

Annual depreciation= $10,093.75

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