Partial-Year Depreciation Calculation for Sandblasting Equipment
What is the depreciation calculation for the sandblasting equipment acquired at a cost of $42,000 with an estimated residual value of $6,000 and an estimated useful life of 10 years, placed in service on October 1 of the current fiscal year ending on December 31, 20Y5?
Depreciation expense in 20Y5 = $900
Depreciation expense in 20Y6 = $3,600
B. Depreciation by Double-Declining-Balance Method:
Depreciation expense in 20Y5 = $2800
Depreciation expense in 20Y6 = $7840
Straight-Line Method
The straight-line depreciation expense is calculated as the cost of the asset minus the salvage value, divided by the useful life.
Depreciation expense = ($42,000 - $6,000) / 10 = $3,600
For the year 20Y5, as the equipment was used from October to December, the depreciation expense is prorated. Hence, 3/12 x $3,600 = $900
Double-Declining-Balance Method
Explanation:The double declining method calculates depreciation as a multiple of the straight-line depreciation factor.
Depreciation factor = 2 x (1 / useful life) = 2 / 10 = 0.2
Depreciation expense in 20Y5 = 0.2 x $42,000 = $8,400, but adjusting for the partial year use, it is $2,800
Depreciation expense in 20Y6 = Book value at the beginning x depreciation expense
Book value = $42,000 - $2,800 = $39,200
Depreciation expense in 20Y6 = $39,200 x 0.2 = $7,840