Question

Depreciation by two methods: A Kubota tractor acquired on January 8 at a cost of $261,000 has an estimated useful life of 10 years, assuming that it will have no residual value.

a. Determine the depreciation for each of the first 2 years by the straight-line method.
First year depreciation: $______
Second year depreciation: $______
b. Determine the depreciation for each of the first 2 years by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your final answers to the nearest dollar.
First year depreciation: $______
Second year depreciation: $______

Answer 1

The first and second year depreciation for a $261,000 Kubota tractor with a 10-year useful life using the straight-line method is $26,100 each year. Using the double-declining-balance method, the first year depreciation is $52,200, and the second year is $41,760.

Step-by-step explanation:

To calculate depreciation for a Kubota tractor using the straight-line method, we divide the initial cost by the useful life of the asset. The tractor costs $261,000 and has a useful life of 10 years. Therefore, each year, the depreciation expense would be $26,100 ($261,000 ÷ 10 years = $26,100 per year). So, the first year depreciation and the second year depreciation by the straight-line method would be $26,100 each.

For the double-declining-balance method, we first calculate the straight-line depreciation rate, which is 10% (100% ÷ 10 years = 10%). Then we double that rate to get 20%.

In the first year, the depreciation expense would be $52,200 ($261,000 × 20% = $52,200). For the second year, we depreciate the remaining book value, which is $208,800 ($261,000 - $52,200 = $208,800). The second year's depreciation is $41,760 ($208,800 × 20% = $41,760), rounded to the nearest dollar.