A storage tank acquired at the beginning of the fiscal year at a cost of $75,000 has an estimated residual value of $10,000

A storage tank acquired at the beginning of the fiscal year at a cost of $75,000 has an estimated residual value of $10,000 and an estimated useful life of 20 years. Determine the following: (a) the amount of annual depreciation by the straight-line method and (b) the amount of depreciation for the first and second years computed by the double-declining-balance method.

Answer:

a. 

5% of ($75,000 – $10,000) = $3,250 or [($75,000 – $10,000) ÷ 20]

b. 

Year 1: 10% of $75,000 = $7,500

Year 2: 10% of ($75,000 – $7,500) = $6,750