A Caterpillar tractor acquired on January 12 at a cost of $216,000 has an estimated useful life of 25 years. Assuming that it will have no residual value. a. Determine the depreciation for each of the first two years by the straight-line method. Round your answer to the nearest cent if rounding is required. Depreciation First year $ Second year $ b. Determine the depreciation for each of the first two years by the double-declining-balance method. Round your answer to the nearest cent if rounding is required. Depreciation First year $ Second year $
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A Caterpillar tractor acquired on January 12 at a cost of $216,000 has an estimated useful life of 25 years. Assuming that it will have no residual value.
a. Determine the
| Depreciation | |
| First year | $ |
| Second year | $ |
b. Determine the depreciation for each of the first two years by the double-declining-balance method. Round your answer to the nearest cent if rounding is required.
| Depreciation | |
| First year | $ |
| Second year | $ |
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