Question

Partial-Year Depreciation Equipment acquired at a cost of $47,000 has an estimated residual value of $3,000 and an estimated useful life of 10 years. It was placed in service on April 1 of the current fiscal year, which ends on December 31. If necessary, round your answers to the nearest cent. a. Determine the depreciation for the current fiscal year and for the following fiscal year by the straight-line method. Depreciation Year 1 A Year 2 A b. Determine the depreciation for the current fiscal year and for the following fiscal year by the double-declining-balance method. Depreciation Year 1 Year 2 $

Answer 1

a	Calculation of Depreciation expense to be recognized under Straight Line Depreciation Method :-
		Annual Depreciation Expense	=	Depreciable Amount
				Useful Life
		Depreciable Amount	=	Cost - Salvage value
		Cost	=	$47,000
		Salvage value (residual value)	=	$3,000
		Useful life	=	10	years
		Depreciable Amount	=	$47,000	-	$3,000
			=	$44,000
		Annual Depreciation Expense	=	$44,000
				10 years
			=	$4,400	per year
		Choose Numerator	/	Choose Denominator	=	Annual Depreciation
		Depreciable Amount	/	Useful life	=	Annual Depreciation
		$44,000	/	10	=	$                              4,400
	In Year 1, From 1st April to 31st December = 9 months i.e. 9/12 = 3/4 is Fraction of year
	Year	Annual Depreciation	×	Fraction of Year	=	Depreciation Expense
	1	$4,400	×	3/4	=	$                              3,300
	2	$4,400	×	1	=	$                              4,400
	Year	Depreciation Expense
	1	$                     3,300
	2	$                     4,400
b	Calculation of Depreciation expense to be recognized under Double Declining Balance Method of Depreciation :-
	Double Declining Balance Depreciation		=	2 × Straight line Depreciation rate × Book value at the beginning of the year
		Cost	=	$                        47,000
	Less: Salvage value		=	$                          3,000
	Depreciable Amount		=	$                        44,000
	Useful life		=	10 years
	Straight line Depreciation Rate		=	100
				10
			=	10%
	Double Declining Balance Depreciation Rate		=	2 * 10 =20%
	Purchase Date		=	1st april
	Year 1 Depreciation Period (Apr to Dec)		=	9 months	=	9/12 =3/4
	Year 1 Depreciation Period in fraction of year		=	3/4

Annual Period		Depreciation for the period					End of Period
	Beginning of Period Book Value	Depreciation Rate		Partial Year		Depreciation Expense	Accumulated Depreciation	Book Value
a	b	c		d		e = b*c*d
Year 1	47,000	20.00%		3/4		$                               7,050	$               7,050	$       39,950
Year 2	39,950	20.00%		1		$                               7,990	$             15,040	$       31,960

Year	Depreciation Expense
1	$                      7,050
2	$                      7,990

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