Question

On January 5, 2018 Calvin's Cropcrushers, Inc. purchased crop
crushing equipment for which the following information is available:
Original cost..................				$3,800,000
Estimated residual value.......				$200,000
Useful life in years...........				10	years
Useful life expressed in operating hours				20,000	hours
8	The SECOND year (2019) depreciation if double declining balance is used.
9	The accumulated depreciation at December 31, 2019 (end of
	second year) if double declining balance (DDB) is used.
10	The book value of the equipment on December 31, 2019
	assuming double declining balance is employed.
11	The depreciation for year 2020 assuming the equipment is sold
	on Oct. 31, 2020 and double declining balance is used.
12	The gain or loss (INDICATE WHICH) which would result if the equip.
	is sold for	2,136,667	on October 31, 2020 and DDB is used.
13	The SECOND year (2019) depreciation if sum of the years digits is used

Answer 1

DDB Depreciation = Beginning Book value x 2 times straight line rate

Year	Beg Value	Depreciation @20%	Accumulated Depreciation	End Value
2018	$ 3,800,000	$       760,000	$         760,000	$ 3,040,000
2019	$ 3,040,000	$       608,000	$      1,368,000	$ 2,432,000
2020	$ 2,432,000	$       405,333	$      1,773,333	$ 2,026,667

Depreciation for 2020 is calculated for 10 months

8.
Second year Depreciation = $608000

9.
Accumulated depreciation at December 31, 2019 = $1368000

10.
Book Value of Equipment = $2432000

11.
Depreciation = $405333

12.
Book value on date of sale = $2026667
Since sales value is greater than book value, it is gain on sale

Gain on sale of equipment = $2136667-2026667 = $110000

13.
Depreciation for second year = ($3800000-200000) x 9/55 = $589091