Question

Depreciation by Two Methods

A Kubota tractor acquired on January 8 at a cost of $85,000 has an estimated useful life of 10 years. Assuming that it will have no residual value.

a. Determine the depreciation for each of the first two years by the straight-line method.

First Year	Second Year
$	$

b. Determine the depreciation for each of the first two years by the double-declining-balance method.

First Year	Second Year
$	$

Answer 1

Requirement 1

First Year	Second Year
$ 8,500	$8,500

Requirement 2

First Year	Second Year
$ 17,000	$ 13,600

Working

Straight line Method
A	Cost	$ 85,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 85,000
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$ 8,500

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 85,000	$ 8,500	$ 8,500	$ 76,500
2	$ 76,500	$ 8,500	$ 17,000	$ 68,000

.

Double declining Method
A	Cost	$ 85,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 85,000
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$ 8,500
F=E/C	SLM Rate	10.00%
G=F x 2	DDB Rate	20.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 85,000	20.00%	$ 17,000	$ 17,000	$ 68,000
2	$ 68,000	20.00%	$ 13,600	$ 30,600	$ 54,400