Explanation Given Information: The total cost of small airplane is $ 386 , 000 and expected to have useful life of 4 years. The trade-in value of airplane is $ 70 , 000 . Formula used: The steps to prepare depreciation schedule by the declining balance method are as follows: Step 1: Calculate the declining balance rate by the below formula Declining-balance rate = 1 Useful life × Multiple Step 2: Calculate the depreciation for each year by multiplying beginning book value by declining balance rate as: Depreciation for the year = Beginning book value × Declining − balance rate Step 3: Calculate the ending book value by subtracting depreciation of the year from the beginning book value as: Ending book value = Beginning book value − Depreciation for year 1 Step 4: The depreciation is complete when the ending book value equals the salvage value. Step 5: Prepare the depreciation schedule in form of chart. Calculation: Consider the total cost of small airplane is $ 386 , 000 . The trade-in value of airplane is $ 70 , 000 and expected to have useful life of 4 years. The declining-balance rate is: Declining-balance rate = 1 Useful life × Multiple Now, using the above formula, the declining-balance rate is: Declining − balance rate = 1 4 × 150% = 1 4 × 1.5 = 0.375 = 37.5 % The depreciation for the year is: Depreciation for the year = Beginning book value × Declining − balance rate Now, using the above formula, the depreciation for 1 st year is: The depreciation for year 1 = 386 , 000 × 0.375 = $ 144 , 750 The ending book value is: Ending book value = Beginning book value − Depreciation for year 1 Now, using the above formula, the ending book value for 1 st year is: Ending book value = 386 , 000 − 144 , 750 = $ 241 , 250 Now, using the above formula, the depreciation for 2 nd year is: The depreciation for year 2 = 241 , 250 × 0

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

8th Edition

ISBN: 9781337125468

Author: Brechner

Publisher: Cengage

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Chapter 17.I, Problem 3TIE

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To calculate: The depreciation schedule for Kelowna Air Service using 150% declining balance method when the total cost of small airplane is $386,000.

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Chapter 17.I, Problem 2TIE

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Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

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The depreciation schedule for Kelowna Air Service using 150% declining balance method when the total cost of small airplane is $ 386 , 000 .

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