Crane Company purchases equipment on January 1, Year 1, at a cost of $274,000. T
ID: 2521469 • Letter: C
Question
Crane Company purchases equipment on January 1, Year 1, at a cost of $274,000. The asset is expected to have a service life of 6 years and a salvage value of $20,000. Compute the amount of depreciation for each of Years 1 and 2 using the straight-line depreciation method. Depreciation for Year 1 $ Depreciation for Year 2 $ Compute the amount of depreciation for each of Years 1 and 2 using the sum-of-the-years’-digits method. Depreciation for Year 1 $ Depreciation for Year 2 $ Compute the amount of depreciation for each of Years 1 and 2 using the double-declining-balance method. (Round answers to 0 decimal places, e.g. 45,892.) Depreciation for Year 1 $ Depreciation for Year 2 $
Explanation / Answer
1.Depreciation as per straight-line =(Cost-Salavage value)/Useful life
=(274000-20000)/6
=$42333.33(Approx)
2.Total sum of years=(1+2+3....+6)=21
Depreciable value=(2740000-20000)=$254000
Hence depreciation form :
Year 1=(6/21)*254000=$72571.43
Year 2=(5/21)*254000=$60476.19
3.Depreciation rate as per straight line method=(100/6)=16.67% per year
Hence depreciation as per double decline balance =2*Depreciation rate as per straight line method*Beginning vaue of each period
NOTE:Answers have been rounded to 0 decimal places.
Year Beginning value Depreciation Ending value 1 274000 (2*16.67%*274000)=$91333.33 (274000-91333.33)=182,666.67 2 182,666.67 (2*16.67%*182,666.67)=$60888.89(Approx).