Question

Question 1:

Sandblasting equipment acquired at a cost of $99,000 has an estimated residual value of $6,000 and an estimated useful life of 5 years. It was placed in service on April 1 of the current fiscal year, which ends on December 31. If necessary, round your answers to the nearest cent.

a. Determine the depreciation for the current fiscal year and for the following fiscal year by the straight-line method.

Year 1 = ________

Year 2 = 18,600

Question 2:

Monte’s Coffee Company purchased packaging equipment on January 5, 2014, for $111,500. The equipment was expected to have a useful life of three years, or 20,000 operating hours, and a residual value of $7,500. The equipment was used for 8,950 hours during 2014, 7,040 hours in 2015, and 4,010 hours in 2016. For DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

Double-Declining Balance Method:

2014 = _______

2015 = _______

2016 = _______

Total = _______

Answer 1

1.

Cost = $99000

Residual Value = $6000

Useful Life = 5 years

Placed in Service April 1. Therefore, used for 9 months in current year.

Depreciation For Current Year = [(Cost - Salvage value) / Life] * (9/12)

= [(99000-6000)/5]*9/12

= $ 13950

Depreciation for following year = [(Cost - Salvage value) / Life]

= (99000-6000)/5

= $18600

2.

Cost = $111500

Salvage = $7500

Useful Life = 3 years

Depreciation percentage = (100/useful life)*2 = 66.6667%

2014 Depreciation = 111500 * 66.6667% * 361/365 = $73518.7582

= $ 73519

Asset was placed on Jan 5, so 361 days have been taken instead of 365.

2015 Depreciation = (111500 - 73519) * 66.6667% = 25320.6793

= $ 25321

2016 depreciation = (111500 - 73519 - 25321) * 66.6667% = 8440.0042

= $ 8440

But, Depreciation will be taken as 5160 as salvage will be 7500. Depreciation for 2016 will be 5160.