Question

# Partial-Year Depreciation Equipment acquired at a cost of \$97,000 has an estimated residual value of \$6,000...

Partial-Year Depreciation

Equipment acquired at a cost of \$97,000 has an estimated residual value of \$6,000 and an estimated useful life of 10 years. It was placed into service on October 1 of the current fiscal year, which ends on December 31.

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

 Depreciation Year 1 Year 2

b. Determine the depreciation for the current fiscal year and the following fiscal year by the double-declining-balance method.

 Depreciation Year 1 Year 2

a.

Straigt line depreciation expense per annum = (Cost - Residual value) / Years

= (\$97,000 - \$6,000) / 10

= \$91,000 / 10

= \$9,100

Depreciation expense

Year 1 (october - december) = \$9,100 * (3/12)

= \$2,275

Year 2 = \$9,100

b.

Double declining balance rate = straight line depreciation rate * 2

= (100/10) * 2

= 20%

Depreciation expense

Year 1 (october - december) = Cost * depreciation rate * (3/12)

= \$97,000 * 20% * (3/12)

= \$4,850

Year 2 = (\$94,000 - \$4,850) * 20%

= \$89,150 * 20%

= \$17,830

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