EX 10-13 Depreciation by two methods

A storage tank acquired at the beginning of the fiscal year at a cost of $344,000 has an estimated residual value of $50,000 and an estimated useful life of 16 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 doubledeclining-balance method.

Answer:
a. 6 1/4% of ($344,000 – $50,000) = $18,375 or [($344,000 – $50,000)/16]
b. Year 1: 12.5% of $344,000 = $43,000
   Year 2: 12.5% of ($344,000 – $43,000) = $37,625

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