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Chapter 11: Q15E (page 587)

Andrea Torbert purchased a computer for \(8,000 on July 1, 2017. She intends to depreciate it over 4 years using the double-declining-balance method. Salvage value is \)1,000. Compute depreciation for 2018.

Short Answer

Expert verified

Depreciation for 2018 = $3,000

Step by step solution

01

Meaning of Double declining depreciation

In double declining balance depreciation, the existing depreciation approach is doubled. Deferring income taxes to later years permits the company to devalue settled resources more intensely during its early years.

02

Computing depreciation for 2018 

Double-declining rate

25% straight-line rate X 2 = 50%

Depreciation for the first full year.

$4,000

Depreciation for half a year (first year), 2017

$2,000

Depreciation for 2018.

$3,000

Working notes:

Calculating the amount of depreciation for the first full years

Depreciationforfirstfullyears=Costofcomputer×Doubledecliningrate=$8,000×50%=$4,000


Calculating the amount of depreciation for half a year

Depreciation forhalfayear=Depreciationforfirstfullyears×Totalmonth=$4,000×612=$2,000

Calculating the amount of depreciation for 2018

Depreciationfor2018=(Costofcomputer-Depreciationforhalfyear)×Doubledecliningrate=($8,000-$2,000)×50%=$6,000×50%=$3,000

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Most popular questions from this chapter

(Different Methods of Depreciation) Jackel Industries presents you with the following information.

Description

Date Purchased

Cost

Salvage Value

Life in years

Depreciation Method

Accumulated depreciation to 12/31/18

Depreciation for 2019

Machine A

2/12/17

\(142,500

\)16,000

10

(a)

$33,350

(b)

Machine B

8/15/16

(c)

21,000

5

SL

29,000

(d)

Machine C

7/21/15

75,400

23,500

8

DDB

(e)

(f)

Machine D

10/12/(g)

219,000

69,000

5

SYD

70,000

(h)

Instructions

Complete the table for the year ended December 31, 2019. The company depreciates all assets using the half-year convention.

Toro Co. has equipment with a carrying amount of \(700,000. The value-in-use of the equipment is \)705,000, and its fair value less costs of disposal is $590,000. The equipment is expected to be used in operations in the future. What amount (if any) should Toro report as an impairment to its equipment?

(Composite Depreciation) Presented below is information related to LeBron James Manufacturing Corporation.

Asset

Cost

Estimated Salvage

Estimated Life (in years)

A

\(40,500

\)5,500

10

B

33,600

4,800

9

C

36,000

3,600

9

D

19,000

1,500

7

E

23,500

2,500

6

Instructions

  1. Compute the rate of depreciation per year to be applied to the plant assets under the composite method.
  2. Prepare the adjusting entry necessary at the end of the year to record depreciation for the year.
  3. Prepare the entry to record the sale of asset D for cash of $4,800. It was used for 6 years, and depreciation was entered under the composite method.

(Depreciation Computations—SL, SYD, DDB) Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of \(469,000. The asset is expected to have a service life of 12 years and a salvage value of \)40,000.

Instructions

  1. Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method.
  2. Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years’-digits method.
  3. Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (In performing your calculations, round constant percentage to the nearest one-hundredth of a point and round answers to the nearest dollar.)

Brazil Group purchases a vehicle at a cost of \(50,000 on January 2, 2017. Individual components of the vehicle and useful lives are as follows.

Cost

Useful Lives

Tires

\) 6,000

2 years

Transmission

10,000

5 years

Trucks

34,000

10 years

Instructions

(Assume no residual (salvage) value.)

  1. Compute depreciation expense for 2017, assuming Brazil depreciates the vehicle as a single unit.
  2. Compute depreciation expense for 2017, assuming Brazil uses component depreciation.
  3. Why might a company want to use component depreciation to depreciate its assets?
See all solutions

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