A Kubota tractor acquired on January 6 at a cost of $90,000 has an estimated useful life of 20 years. Assuming that it will have no residual value

A Kubota tractor acquired on January 6 at a cost of $90,000 has an estimated useful life of 20 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years (a) by the straight-line method and (b) by the doubledeclining-balance method.


Answer:









a.
First Year
5% of $90,000 = $4,500
or
$90,000 ÷ 20 = $4,500
Second Year
5% of $90,000 = $4,500
or
$90,000 ÷ 20 = $4,500
b. 10% of $90,000 = $9,000 10% of ($90,000 – $9,000) = $8,100



A storage tank acquired at the beginning of the fiscal year at a cost of $240,000 has an estimated residual value of $30,000 and an estimated useful life of 25 years. Determine the following: (a) the amount of annual depreciation by the straight-line method and (b) the amount of depreciation for the first and second years computed by the doubledeclining-balance method.


Answer:
a.
4% of ($240,000 – $30,000) = $8,400 or [($240,000 – $30,000)/25]

b.
Year 1: 8% of $240,000 = $19,200
Year 2: 8% of ($240,000 – $19,200) = $17,664