Question

Prepare a depreciation schedule to be used for tax purposes for a $60,000 dump truck using the 200% declining-balance method and the mid-year convention.

Answer 1

Under double declining method of depreciation,Depreciation would be 200% of that of Straight line method of depreciation.As per IRS useful life for the vehicles (DumpTruck) woulfd be 5 years.Hence straightline depreciation would be 60000/5 i.e. 12000.Therefore Depreciation under 200%Double declining method would be:

Year Depreciation

1 2(12000)=24000

2 24000

3 12000

In mid year conventon method it would be treated like as if asset was purchased in the middle of the year and only half depreciation would be expensed in the year one.This applies to all forms of depreciation including double declining method and straight line method.Under this method the deprection should be as follows(using Staright line mehod)

Year Depreciation

1 12000/2=6000

2 12000

3 12000

4 12000

5 12000

6 6000

Using Double declining method for Mid convention

Year Depreciation

1 24000/2 =12000

2 24000

3 12000+12000=24000