Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value of $6,000 and an estimated useful life of 10 years

Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value of $6,000 and an estimated useful life of 10 years. It was placed into service on April 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the following fiscal year by (a) the straight-line method and (b) the double-declining-balance method.


Answer:
a.
Year 1: 9/12 × [($36,000 – $6,000) ÷ 10] = $2,250
Year 2: ($36,000 – $6,000) ÷ 10 = $3,000

b.
Year 1: 9/12 × 20% of $36,000 = $5,400
Year 2: 20% of ($36,000 – $5,400) = $6,120



A building with a cost of $780,000 has an estimated residual value of $90,000, has an estimated useful life of 40 years, and is depreciated by the straight-line method. (a) What is the amount of the annual depreciation? (b) What is the book value at the end of the twenty-fourth year of use? (c) If at the start of the twenty-fifth year it is estimated that the remaining life is 10 years and that the residual value is $70,000, what is the depreciation expense for each of the remaining 10 years?


Answer:
a. $17,250 [($780,000 – $90,000) ÷ 40]
b. $366,000 [$780,000 – ($17,250 × 24 yrs.)]
c. $29,600 [($366,000 – $70,000) ÷ 10 yrs.]




Willow Creek Company purchased and installed carpet in its new general offices on April 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value.

a. Prepare the journal entry necessary for recording the purchase of the new carpet.
b. Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method.


Answer:









a.
 Apr. 30 Carpet 18,000
Cash 18,000
b.
 Dec. 31 Depreciation Expense 800
Accumulated Depreciation—Carpet 800
Carpet depreciation
[($18,000 ÷ 15 years) × 8/12].