Question

Depreciation by Two Methods A storage tank acquired at the beginning of the fiscal year at a cost of $90,000 has an estimated residual value of $12,000 and an estimated useful life of 25 years. a. Determine the amount of annual depreciation by the straight-line method. s b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Depreciation Year 1 $ Year 2 $ 10 more Check My Work uses remaining.

Answer 1

Requirement a

Annual depreciation by straight line method = $3,120

Working

Straight line Method
A	Cost	$ 90,000
B	Residual Value	$ 12,000
C=A - B	Depreciable base	$ 78,000
D	Life [in years left ]	25
E=C/D	Annual SLM depreciation	$ 3,120

Requirement 2

Year	Depreciation expense
1	$ 7,200
2	$ 6,624

Working

Double declining Method
A	Cost	$ 90,000
B	Residual Value	$ 12,000
C=A - B	Depreciable base	$ 78,000
D	Life [in years]	25
E=C/D	Annual SLM depreciation	$ 3,120
F=E/C	SLM Rate	4.00%
G=F x 2	DDB Rate	8.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 90,000	8.00%	$ 7,200	$ 7,200	$ 82,800
2	$ 82,800	8.00%	$ 6,624	$ 13,824	$ 76,176