A John Deere tractor acquired on January 5 at a cost of$44,800 has an estimated

Question

A John Deere tractor acquired on January 5 at a cost of$44,800 has an estimated useful life of 16 years. Assumingthat it will have no residual value, determine the depreciation foreach of the first two years (a) by the straight-line method and (b)by the double-declining-balance method. Round to the nearestdollar.

Text states , (a) $2,800 A John Deere tractor acquired on January 5 at a cost of$44,800 has an estimated useful life of 16 years. Assumingthat it will have no residual value, determine the depreciation foreach of the first two years (a) by the straight-line method and (b)by the double-declining-balance method. Round to the nearestdollar.

Explanation / Answer

Straight -line method Cost $ 44,800   = $ 2,800/yr            16 For straight-line method depreciation amount remains the same. So, depreciation for first year = $ 2,800 depreciation for second year =$ 2,800 Double-Declining balance method 100 = 6.25 % depreciation for straight line 16 For Double depreciation 6.25 * 2 = 12.5% Depreciation for year one 44,800 * 12.5% =   $5,600 For year 2 (44,800-5,600 = 39,200)                     39,200 *12.5%                  =    $ 4,900

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