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Homework answers / question archive / The Oakdale Country Club has purchased new merchandise display racks for the Pro Shop at a cost of $5,000
The Oakdale Country Club has purchased new merchandise display racks for the Pro Shop at a cost of $5,000. The life of the racks is five years with a $500 salvage value.
Required:
What is the annual depreciation amount for the first year for both the straight-line method and the double declining balance method.
Straight-line method - 1st year depreciation amount $ ( )
What is the Journal Entry for this depreciation ? Straight line method )
Dr. ( ) $ ( )
Cr. ( ) $ ( )
Double declining method - 1st year depreciation amount $ ( )
Computation of Annual depreciation amount for the first year using both the straight-line method and the double declining balance method:
Straight-line Method:
Annual Depreciation = (Cost - Salvage Value)/Useful Life of Asset
= ($5,000-$500)/5
= $4,500/5
Annual Depreciation = $900
So, Annual depreciation amount for the first year using the straight-line method is $900.
| Journal Entry: | |||
| Date | Account Titles and Explanation | Debit | Credit |
| Depreciation | $900 | ||
| Accumulated Depreciation | $900 | ||
| (Being entry made to record straight line depreciation) | |||
Double-declining Balance Method:
Depreciation Rate = 1/Useful Life of Asset*2 = 1/5*2 = 0.40 or 40%
Depreciation Amount for First Year = Book Value of Asset at the beginning of Year*Depreciation rate
= $5,000*40%
Depreciation Amount for First Year = $2,000
So, Annual depreciation amount for the first year using the Double-declining balance method is $2,000.
