In: Accounting
Real Estate Office
A real estate office using the double-declining-balance method of depreciation purchased office furniture costing $9,000 and put it in use on April 1. The furniture is expected to have a useful life of 10 years and an estimated resale value of $600.
Refer to the Real Estate Office scenario. Compute the depreciation expense for April 1 through December 31 of the first tax year and all 12 months of the second and third years.
SOLUTION : | |||||
CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD FOR MACHINE C | |||||
Rate of Depreciation = | |||||
Rate of Depreciation = (1 / 10 Years ) | 0.10 or 10.00% | ||||
(Depreication / Purchase price ) | |||||
Double decline deprection rate = 10% * 2 = | 20.0% | ||||
Rate of depreciation for first year = 20% X 9 Month / 12 month= | 15.0% | ||||
Years | Book Value / Beginning value | Derecaition Rate | Depreciation expenses | Closing Value | |
Year 1 - April to Dec | $ 9,000 | 15% | $ 1,350 | $ 7,650 | |
Year 2 | $ 7,650 | 20% | $ 1,530 | $ 6,120 | |
Year 3 | $ 6,120 | 20% | $ 1,224 | $ 4,896 | |
Answer = | |||||
Depeciaiton Expenses | |||||
Year 1 - April to Dec | $ 1,350 | ||||
Year 2 | $ 1,530 | ||||
Year 3 | $ 1,224 | ||||