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Sandblasting equipment acquired at a cost of $40,000 has an estimated residual value of $8,000 and an estimated useful life of eight years. It was placed into service on April 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the following fiscal year by (a) the straight-line method and (b) the double-declining-balance method.

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Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436

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BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436
Chapter 10, Problem 14E
Textbook Problem
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Sandblasting equipment acquired at a cost of $40,000 has an estimated residual value of $8,000 and an estimated useful life of eight years. It was placed into service on April 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the following fiscal year by (a) the straight-line method and (b) the double-declining-balance method.

(a)

To determine

Determine the amount of depreciation by the straight-line method for the current fiscal year and for the following fiscal year.

Explanation of Solution

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:

Depreciation = (Cost of the assetResidual value)Estimated useful life of the asset

Determine the amount of depreciation for the current fiscal year.

Cost of the equipment= $40,000

Estimated residual value=$8,000

Estimated Useful Life =8 years

Number of months used in the current fiscal year = 9 months (April 1-December 31)

Partial-yearDepreciationforthecurrentyear] = [(Cost of the assetResidual value)Estimated useful life of the asset×Numberofmonthsused12]=$40,000$8,0008years×9months12=$32,0008×912=$3,000

Determine the amount of depreciation for the following fiscal year

(b)

To determine

Determine the amount of depreciation by the double-declining-balance method for the current fiscal year and for the following fiscal year.

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Chapter 10 Solutions

Financial Accounting
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