Answer:
Waller Company
Comparison of Straight-line Depreciation and Declining Balance Methods
Straight-line method Declining balance method
Cost of equipment $24,000 $24,000
1st year depreciation exp. 1,860 2,760
Net book value 22,140 21,240
2nd year depreciation exp. 1,860 2,371.50
Ner book value 20,280 18,868.50
Step-by-step explanation:
a) Data and Calculations:
Cost of purchased equipment = $24,000
Duration of useful life = 10 years
Estimated salvage value = $5,400
Depreciable amount under the straight-line method = $18,600
Depreciation expense per year under the straight-line method = $1,860 ($18,600/10)
Under the declining balance method:
The depreciation rate = 10% * 150% = 15% per year
Depreciation expense for the first two years:
Year 1, 15% of $18,600 = $2,760
Year 2, 15% of ($18,600 - 2,760) = $2,371.50