Question

Depreciation by Two Methods

A storage tank acquired at the beginning of the fiscal year at a cost of $80,000 has an estimated residual value of $4,800 and an estimated useful life of four years.

a. Determine the amount of annual depreciation by the straight-line method.
$fill in the blank 1

b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar.

Depreciation
Year 1 $fill in the blank 2
Year 2 $fill in the blank 3

Answer 1

The amount of annual depreciation by the straight-line method is $18,800.

Annual depreciation

a.  Annual depreciation

Annual depreciation=[($80,000 - $4,800) ÷ 4]

Annual depreciation=$18,800

b. Annual depreciation

Year 1 Annual depreciation= 10% × $80,000

Year 1 Annual depreciation = $8,000

Year 2 Annual depreciation= 10% × ($75,000 - $7,500)

Year 2 Annual depreciation = $7,520

Therefore the amount of annual depreciation by the straight-line method is $18,800.

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