Question

Problem 9-5A Calculating depreciation—partial periods LO2, 3

West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2020, it purchased, with cash, a cruising boat for $936,000, having a useful life of 10 years or 13,800 hours, with a residual value of $246,000. The company’s year-end is December 31.

Required:
Calculate depreciation expense for the fiscal years 2020, 2021, and 2022 by completing a schedule. (Note: Depreciation is calculated to the nearest month. Assume actual hours of service were: 2020, 900; 2021, 1,960; 2022, 1,715.)
Depreciation MethodYearStraight-LineDouble-Declining BalanceUnits-of-Production202020212022

Answer 1

Straight Line method
Date	Cost of asset	Depreciable cost	Depreciation rate	Depreciation expenses	Accumulated Depreciation	Book value
2020-10 months	$9,36,000	$6,90,000	8.33%	$57,477	$57,477	$8,78,523
2021	$9,36,000	$6,90,000	10.00%	$69,000	$1,26,477	$8,09,523
2022	$9,36,000	$6,90,000	10.00%	$69,000	$1,95,477	$7,40,523
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
2020-10 months	$9,36,000	$9,36,000	16.66%	$1,55,938	$1,55,938	$7,80,062
2021	$9,36,000	$7,80,062	20.00%	$1,56,012	$3,11,950	$6,24,050
2022	$9,36,000	$6,24,050	20.00%	$1,24,810	$4,36,760	$4,99,240
Units of production
Date	Depreciable cost	Depreciation per hour	No. of hours	Depreciation expenses	Accumulated Depreciation	Book value
2020-10 months	$6,90,000	$50	900	$45,000	$45,000	$8,91,000
2021	$6,90,000	$50	1960	$98,000	$1,43,000	$7,93,000
2022	$6,90,000	$50	1715	$85,750	$2,28,750	$7,07,250