Partial-Year Depreciation Equipment acquired at a cost of $105,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years. It was placed into service on May 1 of the current fiscal year, which ends on December 31.A. Determine the depreciation for the current fiscal year and for the following fiscal year by the straight-line method. Depreciation
Year 1$6,200
Year 2$9,300B. Determine the depreciation for the current fiscal year and for the following fiscal year by the double-declining-balance method.
Depreciation
Year 1$
Year 2$

1. Based on the straight-line method, the Depreciation Expense for the current fiscal year is $6,200 ($9,300 x 8/12).

2. Based on the straight-line method, the Depreciation Expense for the following fiscal year is $9,300 ($93,000/10).

3. Based on the double-declining-balance method, the Depreciation Expense for the current fiscal year is $14,000.

4. Based on the double-declining-balance method, the Depreciation Expense for the following fiscal year is $18,200.

Data and Calculations:

Cost of equipment = $105,000

Estimated residual value = $12,000

Estimated useful life = 10 years

Date of put into use = May 1

Depreciable amount = $93,000 ($105,000 - $12,000)

Annual depreciation expense based on the straight-line method = $9,300 (93,000/10)

Double-declining=balance method:

Depreciation rate = 20% (100/10 x 2)

Depreciation for the first year = $14,000 ($105,000 x 20% x 8/12)

Reduced balance after the first year = $91,000 ($105,000 - $14,000)

Depreciation for the second year = $18,200 ($91,000 x 20%)

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Answer and Explanation:

A. The computation of he depreciation for the current fiscal year and for the following fiscal year using the straight-line method is shown below:-

= (Original cost - residual value) ÷ (estimated useful life)

= ($105,000 - $12,000) ÷ (10 years)

= $9,300

For the current year, the depreciation expense is

= $9,300 × 8 months ÷ 12 months

= $6,200

The 8 months are calculated from May 1 to December 31

And, for the following fiscal year , the depreciation expense is $9,300

B. The computation of depreciation for the current fiscal year and for the following fiscal year using the double-declining-balance method is shown below:-

But before that

Rate of depreciation under double declining depreciation = 2 × (1 ÷ Life) × 100

= 2 × (1 ÷ 10) × 100

= 20%

1st Year depreciation = Equipment cost × Rate of depreciation under double declining depreciation × Beginning may ÷ Ending December

= $105,000 × 20% × 8 ÷ 12

= $14,000

2nd year depreciation = Depreciation on $105,000 for the four months at 20%

= Equipment cost × Rate of depreciation under double declining depreciation × Remaining months ÷ Ending December

= $105,000 × 20% × 4 ÷ 12

= $7,000

and now we calculate the 20% on balance in machinery for 8 months.

Balance = Equipment cost - 1st Year depreciation - 2nd Year depreciation

= $105,000 - $14,000 - $7,000

= $84,000

Depreciation = Balance Rate of depreciation under double declining depreciation × Beginning may ÷ Ending December

= $84,000 × 20% × 8 ÷ 12

= $11,200

Total depreciation in year 2 = 2nd year depreciation + Depreciation

= $7,000 + $11,200

= $18,200

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