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Partial-Year Depreciation Equipment acquired at a cost of $105,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years. It was placed into service on May 1 of the current fiscal year, which ends on December 31. A. Determine the depreciation for the current fiscal year and for the following fiscal year by the straight-line method.

Depreciation

Year 1 $6,200

Year 2 $9,300B. Determine the depreciation for the current fiscal year and for the following fiscal year by the double-declining-balance method.

Depreciation

Year 1 $

Year 2 $

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Answers (1)
  1. Today, 19:02
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    Answer and Explanation:

    A. The computation of he depreciation for the current fiscal year and for the following fiscal year using the straight-line method is shown below:-

    = (Original cost - residual value) : (estimated useful life)

    = ($105,000 - $12,000) : (10 years)

    = $9,300

    For the current year, the depreciation expense is

    = $9,300 * 8 months : 12 months

    = $6,200

    The 8 months are calculated from May 1 to December 31

    And, for the following fiscal year, the depreciation expense is $9,300

    B. The computation of depreciation for the current fiscal year and for the following fiscal year using the double-declining-balance method is shown below:-

    But before that

    Rate of depreciation under double declining depreciation = 2 * (1 : Life) * 100

    = 2 * (1 : 10) * 100

    = 20%

    1st Year depreciation = Equipment cost * Rate of depreciation under double declining depreciation * Beginning may : Ending December

    = $105,000 * 20% * 8 : 12

    = $14,000

    2nd year depreciation = Depreciation on $105,000 for the four months at 20%

    = Equipment cost * Rate of depreciation under double declining depreciation * Remaining months : Ending December

    = $105,000 * 20% * 4 : 12

    = $7,000

    and now we calculate the 20% on balance in machinery for 8 months.

    Balance = Equipment cost - 1st Year depreciation - 2nd Year depreciation

    = $105,000 - $14,000 - $7,000

    = $84,000

    Depreciation = Balance Rate of depreciation under double declining depreciation * Beginning may : Ending December

    = $84,000 * 20% * 8 : 12

    = $11,200

    Total depreciation in year 2 = 2nd year depreciation + Depreciation

    = $7,000 + $11,200

    = $18,200
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