Question

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.

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.

	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

Answer 1

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