Chapter 11, Problem 11.11E

(1)

To determine

Straight line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

$\text{Depreciation expense = }\frac{\text{Cost of the Asset }-\text{ Residual value}}{\text{Estimated Useful Life of the Asset}}$

Double declining balance (DDB) method:

In this method of depreciation, the depreciation is calculated by multiply beginning of year book value, not depreciable base, by an annual rate that is a multiple of the straight line rate.

$\text{Depreciation expense}\text{=}\left(\begin{array}{l}\text{Begining}\text{value}\\ \text{of}\text{the}\text{asset}\end{array}\right)\text{×}\left(\begin{array}{l}\text{Straight}\text{line}\text{rate}\\ \text{of}\text{depreciation }\times \text{ 2}\end{array}\right)$

To calculate: Depreciation for each year of the equipment’s eight-year life.

(2)

To determine

To discuss: The accounting treatment of the depreciation on the equipment.