Gandof Construction Co. purchased a used CAT 336DL earth movertaos of s500,000 i
ID: 2332239 • Letter: G
Question
Gandof Construction Co. purchased a used CAT 336DL earth movertaos of s500,000 in January 2016. The company's estimated useful life of this heavy equipment is 10 years, and the estimated salvage value is $100,000. Required: a. Using straight-line depreciation, calculate the depreciation expense to be recognized for 2016, the equipment's net book value at December 31, 2018, after the third year of the equipment's life. Depreciation expense Net book value S 40,000 $ 380,000 b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense to be recognized for 2018, the third year of the equipment's life. Si rate Depreciation expenseExplanation / Answer
1.Annual depreciation as per straight line method=(Cost-Salvage value)/Useful Life
=(500,000-100,000)/10
=$40000/year
Hence book value after third year=Cost-Accumulated Depreciation
=$500,000-($40000*3)
=$380,000
2.
Depreciation rate as per straight line method=100/10
=10%/year
Hence double declining rate=2*Depreciation rate as per straight line method
=(2*10%)=20%
Hence annual depreciation as per double declining balance method=double declining rate*Book value at end of each period
a.
b.
Year Beginning value Depreciation Ending value 1 500,000 (20%*500,000)=100,000 (500,000-100,000)=400,000 2 400,000 (20%*400,000)=80,000 (400,000-80,000=320,000 3 320,000 (20%*320,000)=64000.Related Questions
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