Question

CHAPTER 7 13 Grant Company purchased an equipment on January 1, 2017, for $210,000. The equipment was expected to have a useful life of 5 years and a residual value of $10,000. Required: 1. Determine the amount of depreciation expense for the years ended December 2017, 2018, and 2019 by a) the straight-line method; b) the double-declining method. re ANSWER BELOW: (Show your computation details) |(If you do not show how you get your answer, you will receive only up to 30% of the credit)

Answer 1

Solution

Straight line method
Year		Depreciation expense
2017		$ 40,000
2018		$ 40,000
2019		$ 40,000

Double declining
Year			Depreciation expense
2017			$ 84,000
2018			$ 50,400
2019			$ 30,240

Working

Straight line Method
A	Cost	$ 210,000
B	Residual Value	$ 10,000
C=A - B	Depreciable base	$ 200,000
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$ 40,000

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2017	$ 210,000	$ 40,000	$ 40,000	$ 170,000
2018	$ 170,000	$ 40,000	$ 80,000	$ 130,000
2019	$ 130,000	$ 40,000	$ 120,000	$ 90,000

Double declining Method
A	Cost	$ 210,000
B	Residual Value	$ 10,000
C=A - B	Depreciable base	$ 200,000
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$ 40,000
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2017	$ 210,000	40.00%	$ 84,000	$ 84,000	$ 126,000
2018	$ 126,000	40.00%	$ 50,400	$ 134,400	$ 75,600
2019	$ 75,600	40.00%	$ 30,240	$ 164,640	$ 45,360