Question
In: Accounting
A storage tank acquired at the beginning of the fiscal year at a cost of $104,400...
A storage tank acquired at the beginning of the fiscal year at a cost of $104,400 has an estimated residual value of $6,400 and an estimated useful life of four years.
a. Determine the amount of annual depreciation
by the straight-line method.
$fill in the blank 1
b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar.
| Depreciation | |
| Year 1 | $fill in the blank 2 |
| Year 2 | $fill in the blank 3 |
Solutions
Expert Solution
a.
Cost of storage tank = $104,400
Estimated residual value = $6,400
Estimated useful life = 4 years
Annual depreciation expense = ( Cost of storage tank-Estimated residual value )/Estimated useful life
= (104,400-6,400)/4
= $24,500
| Depreciation | |
| Year 1 | $24,500 |
b.
Double declining depreciation rate = 2 x 1/Useful life
= 2 x 1/4
= 50%
Depreciation expense for year 1 = Cost of storage tank x Double declining depreciation rate
= 104,400 x 50%
= $52,200
Book value of storage tank at the end of year 1 = Cost of storage tank- Depreciation expense for year 1
= 104,400-52,200
= $52,200
Depreciation expense for year 2 = Book value of storage tank at the end of year 1 x Double declining depreciation rate
= 52,200 x 50%
= $26,100
| Depreciation | |
| Year 1 | $52,200 |
| Year 2 | $26,100 |
Kindly comment if you need further assistance. Thanks‼!
ekkarill92 answered 1 year agoRelated Solutions
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