Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below. On April 1, Cyclone's Co. purchases a trencher for $310,000. The machine is expected to last five years and have a salvage value of $55,000. Exercise 8-12 Double-declining-balance, partial-year depreciation LO C2 Compute depreciation expense at December 31 for both the first year and second year assuming the company uses the double- declining-balance method. (Enter all amounts as positive values.) Depreciation for the Period End of Period Depreciation Rate Partial Year Depreciation Expense Book Value Beginning of Annual Period Period Book Value Year 1 Year 2 Accumulated Depreciation 0 0 $ 0 $ $

second.

Answer 1

(a)

Under double declining balance method,

Depreciation per annum = 2 x straight line depreciation percentage x book value at the beginning of period

And,

Straight line depreciation percentage = 100%/useful life = 100%/5 = 20%

Therefore,

For year 1:

Book value in the beginning = $310000

Depreciation expenses = 2 x 20% x $310000 = $124000

Book value at the end = $186000

For year 2:

Book value in the beginning = $186000

Depreciation expenses = 2 x 20% x $186000 = $74400

Book value at the end = $111600

(b)

Under straight line method of depreciation,

Depreciation per annum = (initial cost - salvage value)/useful life

= ($310000 - $55000)/5

= $51000

For year 1:

Depreciation expenses = $51000

For year 2:

Depreciation expenses = $51000