Question

Depreciation by Two Methods A storage tank acquired at the beginning of the fiscal year at a cost of $90,000 has an estimated residual value of $5,600 and an estimated useful life of four years a. Determine the amount of annual depreciation by the straight-line method. b. Determine the amount of depreciation for the first and second years computed by the double-declining balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar Depreciation Year 1 $ Year 2

Answer 1

a)	Straight line method depreciation	=	(Cost - Residual Value)/ Useful Life
		=	($90000-$5600)/4
		=	$                                                   21,100.00
b)	Double Declining Depreciation rate	=	[(100%)/4]*2
			50%
			Depreciation
	Year 1	=	$90000*50%
			$45,000
	Year 2	=	($90000-$45000)*50%
			$22,500