Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value of $6,000 and an estimated useful life of 10 years

Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value of $6,000 and an estimated useful life of 10 years. It was placed into service on April 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the following fiscal year by (a) the straight-line method and (b) the double-declining-balance method.


Answer:
a.
Year 1: 9/12 × [($36,000 – $6,000) ÷ 10] = $2,250
Year 2: ($36,000 – $6,000) ÷ 10 = $3,000

b.
Year 1: 9/12 × 20% of $36,000 = $5,400
Year 2: 20% of ($36,000 – $5,400) = $6,120



A building with a cost of $780,000 has an estimated residual value of $90,000, has an estimated useful life of 40 years, and is depreciated by the straight-line method. (a) What is the amount of the annual depreciation? (b) What is the book value at the end of the twenty-fourth year of use? (c) If at the start of the twenty-fifth year it is estimated that the remaining life is 10 years and that the residual value is $70,000, what is the depreciation expense for each of the remaining 10 years?


Answer:
a. $17,250 [($780,000 – $90,000) ÷ 40]
b. $366,000 [$780,000 – ($17,250 × 24 yrs.)]
c. $29,600 [($366,000 – $70,000) ÷ 10 yrs.]