A Kubota tractor acquired on January 8 at a cost of $85,000 has an estimated useful life of 10 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years (a) by the straight-line method and (b) by the double-decliningbalance method.

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Asked Dec 17, 2019
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A Kubota tractor acquired on January 8 at a cost of $85,000 has an estimated useful life of 10 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years (a) by the straight-line method and (b) by the double-decliningbalance method.

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Expert Answer

Step 1

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

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(Cost of the asset – Residual value) Depreciati on Estimated u seful life of the asset

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Step 2

(a)

 Determine the amount of depreciation for the first year.

Cost of the refrigerator= $85,000

Estimated Useful Life =10 years

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(Cost of the asset – Residual value) Depreciati on Estimated useful life of the asset S85,000 – So 10 years = S8, 500

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Step 3

Determine the amount of depreciation for the second year. 

Under the straight-line method, the amount of depreciation in each year remains same....

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