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(TCO E) Asphalt Inc. lays asphalt in parking lots and roadways. This year they w

ID: 2416832 • Letter: #

Question

(TCO E) Asphalt Inc. lays asphalt in parking lots and roadways. This year they were awarded the state roadway contract and decided to purchase new equipment.
Asphalt purchased a new piece of equipment with a cost of $43,600 and a $6,000 salvage value, and placed it into service on April 1, Year 1. The equipment was installed at an additional cost of $3,400. The estimated life of the equipment is 8 years.
Required:
Calculate depreciation expense for year 1 using the straight-line method.
Calculate depreciation expense for year 2 using the double-declining balance method
Calculate depreciation expense for year 1 using the straight-line method
Calculate depreciation expense for year 2 using the double-declining balance method


show calculations

Explanation / Answer

Historical cost of asset=43600-6000+3400=$41,000

Straight line deprciation 1 year=41,000/8=5,125 per year.

Depreciation Schedule Year
Book Value
Year Start Depreciation
Percent Depreciation
Expense Accumulated
Depreciation Book Value
Year End 2014 $47,000 18.75% $8,813 $8,813 $38,188 2015(year 2) $38,188 25.00% $9,547 $18,359 $28,641 2016 $28,641 25.00% $7,160 $25,520 $21,480 2017 $21,480 25.00% $5,370 $30,890 $16,110 2018 $16,110 25.00% $4,028 $34,917 $12,083 2019 $12,083 25.00% $3,021 $37,938 $9,062 2020 $9,062 25.00% $2,266 $40,203 $6,797 2021 $6,797 11.72% $797 $41,000 $6,000