Question

Depreciation by Two Methods

A Kubota tractor acquired on January 8 at a cost of $315,000 has an estimated useful life of ten years. Assuming that it will have no residual value.

a. Determine the depreciation for each of the first two years by the straight-line method.

First Year	Second Year
$	$

b. Determine the depreciation for each of the first two years by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your final answer to the nearest dollar.

First Year	Second Year
$	$

Answer 1

1. Year 1 = $ 31,500

Year 2 = $ 31,500

Explanation;

Kubota tractor has no residual value . It has anestimated useful life of 10 years.So the depreciation is = $ 31,500

Year 1 = $315,000 / 10 = $31,500

Year 2 = $315,000 / 10 = $31,500

Here we are using straight - line method . In this method always had the same amount of depreciation per year . So depreciation is $31,500. The amount of depreciation for the first and second year will be the same since we are using the straight line method , So both year 1 and year 2 depreciation is $31,500.

B) .Double Declining Balance Method

Year 1 = 63,000 and

Book Value of Tractor is $252,000

Year 2 = $ 50,400

Book Value of Tractor = $201,600

Explanation;  

In this method fist find out the percentage of depreciation is straight line method and the double it .

Percentage of $ 315,000 x = $ 31,500 =10%

31,500 to be 10%

Using the DDB method you will depreciation the book value each year by 20% .

Year 1 : 20% of $ 315,000 is = 63,000

$315,000 - $63,000 = $ 252,000 ( Book Value)

Year 2 : 20% of 252,000 = $ 50,400

$ 252,000 -$50,400 = $201,600 ( Book Value)