Thanks 2. The depreciation method that does not use residual value in calculatin

Question

Thanks 2. The depreciation method that does not use residual value in calculating the first year's depreciation expense is: A. declining balance B. straight-line C. units-of-production An asset purchased for $75,000 on June 1, 2018 had a residual value of $3,000 and a useful life of six years. What is the book value of the asset when on September 30h, 2019? (Assume the straight-line depreciation method is used.) 3. 4. Equipment purchased April 2, 2018 for $80,000 has an estimated residual value of $6,000 and an estimated life of 5 years. What is the amount of depreciation for the second year ending December 31, 2019, using the declining- balance method at double the straight-line rate?

Explanation / Answer

2) A. declining balance Working: a. Straight Line method: Depreciation Expense = (Cost-Salvage Value)/Useful Life b. units of production method: Depreciation Expense per unit = (Cost-Salvage Value)/Estimated production in units Depreciation Expense = Production in units x Depreciation Expense per unit c. declining balance Depreciation Schedule; Year Beginning Book Value Depreciation Rate Depreciation Expense Ending Book Value a b c=a*b d=a-c 1 2 3 Note:In Year 1 , Cost of Asset is the beginning book value. After year 1, Depreciation is calculated on the beginning book value. Suppose, declining is double of straight line. 3) Book Value of Asset on September 30th, 2019 $ 59,000 Working: Straight Line depreciation = (Cost - Salvage Value)/Useful Life = (75000-3000)/6 = $       12,000 In Year 2018, partially depreciation for 7 months from June 1 to December 31 = $       12,000 x 7/12 = $          7,000 In Year 2019, partially depreciation for 9 months from January 1 to September 30th = $       12,000 x 9/12 = $          9,000 Depreciation Schedule; Year Costs Depreciation Expense Accumulated Depreciation Expense Ending Book Value 2018 $       75,000 $          7,000 $         7,000 $       68,000 2019 $       75,000 $          9,000 $       16,000 $       59,000 4) Amount of Depreciation $       19,200 Working: Straight Line rate = 1/5 = 20% Double declining rate = 2 x 20% = 40% Depreciation Schedule: Year Beginning Book Value Depreciation rate Depreciation Expense Ending book Value 2018 $       80,000 40% $       32,000 $       48,000 2019 $       48,000 40% $       19,200 $       28,800

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