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Jarrod Cengage Learning agenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker-&itakeAssignmentSessionLocator-assignment-take;&inprogress-false; eBook Show Me How Calculator Depreciation by Two Methods A storage tank acquired at the beginning of the fiscal year at a cost of $103,000 has an estimated residual value of $6,000 and an estimated useful life of 15 years. a. Determine the amount of annual depreciation by the straight-line method. 6,800 b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar Depreciation Year 1 14,040X Year 2 13,154X

Explanation / Answer

Answer b.

Cost of Equipment = $108,000
Residual Value = $6,000
Useful Life = 15 years

Straight-line Depreciation Rate = 1 / Useful Life
Straight-line Depreciation Rate = 1 / 15
Straight-line Depreciation Rate = 6.67%

Double-declining Depreciation Rate = 2 * Straight-line Depreciation Rate
Double-declining Depreciation Rate = 2 * 6.67%
Double-declining Depreciation Rate = 13.34%

Depreciation Year 1 = $108,000 * 13.34%
Depreciation Year 1 = $14,407

Book Value at the end of Year 1 = $108,000 - $14,407
Book Value at the end of Year 1 = $93,593

Depreciation Year 1 = $93,593 * 13.34%
Depreciation Year 1 = $12,485

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