Question

Chapter 08 Homework i Saved 00 L Required information [The following information applies to the questions displayed below.) Part 1 of 2 On April 1, 2017, Cyclone's Backhoe Co. purchases a trencher for $290,000. The machine is expected to last five years and have a salvage value of $45,000. points Compute depreciation expense for both years ending December 2017 and 2018 assuming the company uses the straight-line method. eBook Choose Numerator: 1 Choose Denominator: = = Annual Depreciation Annual depreciation Hint X Fraction of Year = Depreciation Expense Print Year Annual Depreciation 2017 2018 x References

Answer 1

Calculation of depreciation under straight line method

Depreciation per year = [(Purchase cost - Salvage value)/ No. of years] * (No. of months during the year/ 12 months)

Year 2017 = [($290,000 - $45,000)/ 5 years] * 9/12 months

= $ 49,000 * 9/12

= $ 36,750

Year 2018 = [($290,000 - $45,000)/ 5 years] * 12/12 months

= $ 49,000

Calculation of depreciation under double-declining balance method

Depreciation per year = [2/ number of years * (Purchase cost - depreciation till date)] * (No. of months during the year/ 12 months)

Year 2017 = [2/ 5 years * ($290,000 - 0)] * 9/12 months

= $116,000 * 9/12

= $ 87,000

Year 2018 = [2/ 5 years * ($290,000 - 87,000) *12/12 months

= $ 81,200