Question

A Kubota tractor acquired on January 8 at a cost of $36,000 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. Do not round the double-declining balance rate. If required, round your final answers to the nearest dollar.

First Year	Second Year
$	$

Answer 1

a.

			First Year		Second Year
Annual depreciation under straight-line method			$ 3,600.00		$               3,600.00
	Explanation
	Straight Line Depreciation per year
	(Cost - Salvage Value)	/	Useful Life	=	Annual Depreciation
	(36,000 - 0)	/	10	=	$               3,600.00

b.

	Double Declining Balance Depreciation
	Beginning book value	x	Double the straight-	=	Depreciation expense
			line rate
First year's depreciation	36,000.00	x	20%	=	7,200.00
Second year's depreciation	28,800.00	x	20%	=	5,760.00
Explanation:
Double-declining-balance rate = (100% / 10 years) × 2 = 20% per year
Book value at beginning of second year = $36,000 – $7,200 = $28,800