An asset for drilling was purchased and placed in service by a petroleum product

Question

An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $13,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the second year and the BV at the end of the third year of life by each of these methods: a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS d. The ADS. Click the icon to view the partial listing of depreciable assets used in business. Click the icon to view the GDS Recovery Rates (r).

Explanation / Answer

ans 1 Straight liane depreciation Dep=(60000-13000)/14 3357 Beg value Dep Acc dep end Value Year 1 60000 3357 3357 56643 2 56643 3357 6714 53286 3 53286 3357 10071 49929 4 49929 3357 13429 46571 Depreciation expense year 2 3357 Book value end of year 3 49929 Double declining DDB rate=1/14*200% 0.143 Beg value Dep rate Dep Acc dep end Value Year 1 60000 14.29% 4285.714 4285.714 55714 2 55714.28571 14.29% 7959 12245 47755 3 47755.10204 14.29% 6822 19067 40933 4 40932.94461 14.29% 5848 24915 35085 Acc dep Depreciation expense year 2 7959 Book value end of year 3 40933 ans 3 GDS Class-7 years Beg value Dep rate Dep Acc dep end Value Year 1 60000 14.29% 4287 4287 55713 2 60000 24.49% 14694 18981 45306 3 60000 17.49% 10494 29475 49506 4 60000 12.49% 7494 36969 52506 Acc dep Depreciation expense year 2 14694 Book value end of year 3 49506

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