Question

Problem 9-5A Calculating depreciation—partial periods LO2, 3

West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2020, it purchased, with cash, a cruising boat for $936,000, having a useful life of 10 years or 13,800 hours, with a residual value of $246,000. The company’s year-end is December 31.

Required:
Calculate depreciation expense for the fiscal years 2020, 2021, and 2022 by completing a schedule. (Note: Depreciation is calculated to the nearest month. Assume actual hours of service were: 2020, 900; 2021, 1,960; 2022, 1,715.)

Answer 1

Accumulated Depreciation for 10 years = Cost - Residual value

= $936,000 - $246,000

= $690,000

2020 depreciation = Accumulated depreciation * (Actual service hours / Total hours)

= $690,000 * (900 / 13,800)

= $45,000

2021 depreciation = $690,000 * (1,960 / 13,800)

= $98,000

2022 depreciation = $690,000 * (1,715 / 13,800)

= $85,750