A storage tank acquired at the beginning of the fiscal year at a cost of $240,000 has an estimated residual value of $30,000 and an estimated useful life of 25 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.
4% of ($240,000 – $30,000) = $8,400 or [($240,000 – $30,000)/25]
b.
Year 1: 8% of $240,000 = $19,200
Year 2: 8% of ($240,000 – $19,200) = $17,664