Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below] On April1, 2016, Cyclone's Backhoe Co. purchases a trencher for $280,000. The machine is expected to last five years Pert 2 of2 and have a salvage value of $40,000 Comporte depreciationepenseto both ywoarsending Dcember 2016 and 2017 assuming the company uses the double decdining- balance method. (Enter all amounts positive values.) points Depreciation for the Period End of Period eBook Hint Print References Beginning of Annual Period Period Book Depreciation Partial Rate Value Depreciation Book Value 2016 2017

Explanation / Answer

CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Trencher $            2,80,000.00 Useful Life = 5 years Depreciation per year = $                56,000.00 (Purchase price / Useful life) Rate of Depreciation = 0.20 or 20% (Depreication / Purchase price ) Double decline deprection rate = 20% * 2 = 40.0% Book Value as on april 01 2016 $            2,80,000.00 Depreciation for the year 1 @ 40% X 9 / 12 $                84,000.00 Closing balance for the year 1 $            1,96,000.00 Opening Balance for the year 2017 $            1,96,000.00 Depreciation for the year 2 @ 40% $                78,400.00 Closing balance for the year 2017 $            1,17,600.00 Annual Period Beginning of period of Book Value Depreciation Rate Partial Year Depreciation Expenses Accumulated Depreciation Book Value 2016 $                                                                     2,80,000 40% 30.00% $                84,000 $            84,000 $       1,96,000 2017 $                                                                     1,96,000 40% 0 $                78,400 $        1,62,400 $       1,17,600

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