Question

Depreciation by two methods A Kubota tractor acquired on January 8 at a cost of $95,000 has an estimated useful life of 4 years. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Assuming that it will have no residual value, determine the depreciation for each of the first two years:

by the straight-line method. Round your answers to the nearest dollar.

First Year $

Second Year $

by the double-declining-balance method. Round your answers to the nearest dollar.

First Year $

Second Year $

Answer 1

Straight Line Method

Year 1	23750
Year 2	23750

The cost = 95000

Useful Year = 4 years

Asset has no salvage value, so asset depreciable base equals to 95000

Yearly depreciation = Depreciation Base / Use ful life

= 95000 / 4 = 23750 in whole 4 years

Double Declining Method

Year 1	47500
Year 2	23750

Under double declining method we will use double the rate of depreciation when use straight line method. Under straight line method we will write off as depreciation yearly 25% of the depreciable value. Asset has 4 years life .

Under DDB Method double rate. That is 50% . and calculate yearly on Net Book Value of each year

For Year 1

95000 x 50% = 47500

For Year 2

Net book value = Cost - Depreciation Year 1

=95000 - 47500 = 47500

Depreciation = 47500 x 50% = 23750