Question

West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2017, it purchased, with cash, a cruising boat for $894,000, having a useful life of 10 years or 16,725 hours with a residual value of $225,000. The company’s year-end is December 31.

Required:
Calculate depreciation expense for the fiscal years 2017, 2018, and 2019 by completing a schedule. (Note: Depreciation is calculated to the nearest month. Assume actual hours of service were: 2017, 830; 2018, 1,890; 2019, 1,645.)

	Depreciation Method Year Straight-Line Double-Declining Balance Units-of-Production 2017 2018 2019

Answer 1

Year	Straight	Double	Units of
	line	declining	production
2017	55,750	149,000	33200
2018	66,900	149,000	75600
2019	66,900	119,200	65800
Straight line = (894000-225000)/10
	66900
for first year dep will be for march to december 66900/12*10=						55750
Double Declining method
1/10*2=	0.2	or 20%
2017	894000*20%=			178800	*12/10=	149000
2018	(894,000-149,000)*20%=			149000
2019	(894000-149000*2)*20%=			119200
units of production
depreciation rate = (		894000-225000)/16725
		40