Equipment with a cost of $180,000 has an estimated residual value of $14,400, has an estimated useful life of 16 years

Equipment with a cost of $180,000 has an estimated residual value of $14,400, has an estimated useful life of 16 years, and is depreciated by the straight-line method. 

(a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the tenth year of use. (c) Assuming that at the start of the eleventh year the remaining life is estimated to be eight years and the residual value is estimated to be $10,500, determine the depreciation expense for each of the remaining eight years.

Answer:

a. $10,350  [($180,000 – $14,400) ÷ 16]

b. $76,500  [$180,000 –  ($10,350 × 10)]

c. $8,250  [($76,500 – $10,500) ÷ 8]

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