Question

Bridgeport Corp. purchased a boardroom table for $ 17,600. The company planned to keep it for four years, after which it was expected to be sold for $ 920.

(a)

Calculate the depreciation expense for each of the first three years under the straight-line method and the double-diminishing-balance method, assuming the table was purchased early in the first month of the first year.

(1) Straight-line method.

Year 1		$
Year 2		$
Year 3		$

(2) Double-diminishing-balance method.

Year 1		$
Year 2		$
Year 3		$

Answer 1

Cost = $17,600

Useful life = 4 years

Residual value = $920

(a)

Depreciation each year under the Straight-line method = (Cost - Residual value) / Useful life

= ($17,600 - $920) / 4

= $4,170

Year 1	$4,170
Year 2	$4,170
Year 3	$4,170

(2) Depreciation each year under Double-diminishing balance method = (Cost - Accumulated depreciation) / Useful life * 2

Year 1	$8,800 [($17,600-$0)/4*2]
Year 2	$4,400 [($17,600-$8,800)/4*2]
Year 3	$2,200 [($17,600-$8,800-$4,400)/4*2]