Question

A Kubota tractor acquired on January 8 at a cost of $324,000 has an estimated useful life of ten years. Assuming that it will have no residual value. a. Determine the depreciation for each of the first two years by the straight-line method. First Year Second Year $ $ b. Determine the depreciation for each of the first two years by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your final answer to the nearest dollar. First Year Second Year $ $

Answer 1

a. Each of the first 2 year will record depreciation expense of 32,400 per year.

b.

Depreciation in Year 1 = 0.2 x 324,000 = 64,800.

Depreciation in Year 2 = 0.2 x (324,000 - 64,800) = 51,840.

Step-by-step explanation:

a. In straight-line depreciation method, depreciation expense is calculated as below:

Depreciation expense = (Origin cost - Residual value)/Estimated useful life

= (324,000 - 0)/10 = 32,400.

So, each of the first 2 year will record depreciation expense of 32,400 per year.

b. In double-declining depreciation method, depreciation expense is calculated as below:

Straight line method depreciation rate = 1/10 = 0.1 => Double declining rate is 0.1 x 2 = 0.2

Depreciation in Year 1 = 0.2 x 324,000 = 64,800.

Depreciation in Year 2 = 0.2 x (324,000 - 64,800) = 51,840.

Answer 2

Instructions are listed below.

Step-by-step explanation:

Giving the following information:

A Kubota tractor acquired on January 8 for $324,000 has an estimated useful life of ten years. Assuming that it will have no residual value.

A) Straight-line method:

Depreciation= 324,000/10= 32,400

First year= 32,400

Second year= 32,400

B) Double declining balance:

Depreciation rate= 0.10

Year 1= 324,000*0.10*2= 64,800

Year 2= (324,000 - 64,800)*0.20= 51,840