Partial-Year Depreciation Equipment acquired at a cost of $105,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years. It was placed into service on May 1 of the current fiscal year, which ends on December 31. A. Determine the depreciation for the current fiscal year and for the following fiscal year by the straight-line method.

Depreciation

Year 1 $6,200

Year 2 $9,300B. Determine the depreciation for the current fiscal year and for the following fiscal year by the double-declining-balance method.

Depreciation

Year 1 $

Year 2 $

Answer and Explanation:

A. The computation of he depreciation for the current fiscal year and for the following fiscal year using the straight-line method is shown below:-

= (Original cost - residual value) : (estimated useful life)

= ($105,000 - $12,000) : (10 years)

= $9,300

For the current year, the depreciation expense is

= $9,300 * 8 months : 12 months

= $6,200

The 8 months are calculated from May 1 to December 31

And, for the following fiscal year, the depreciation expense is $9,300

B. The computation of depreciation for the current fiscal year and for the following fiscal year using the double-declining-balance method is shown below:-

But before that

Rate of depreciation under double declining depreciation = 2 * (1 : Life) * 100

= 2 * (1 : 10) * 100

= 20%

1st Year depreciation = Equipment cost * Rate of depreciation under double declining depreciation * Beginning may : Ending December

= $105,000 * 20% * 8 : 12

= $14,000

2nd year depreciation = Depreciation on $105,000 for the four months at 20%

= Equipment cost * Rate of depreciation under double declining depreciation * Remaining months : Ending December

= $105,000 * 20% * 4 : 12

= $7,000

and now we calculate the 20% on balance in machinery for 8 months.

Balance = Equipment cost - 1st Year depreciation - 2nd Year depreciation

= $105,000 - $14,000 - $7,000

= $84,000

Depreciation = Balance Rate of depreciation under double declining depreciation * Beginning may : Ending December

= $84,000 * 20% * 8 : 12

= $11,200

Total depreciation in year 2 = 2nd year depreciation + Depreciation

= $7,000 + $11,200

= $18,200