Partial-Year Depreciation Calculation for Sandblasting Equipment

What is the depreciation calculation for the sandblasting equipment acquired at a cost of $42,000 with an estimated residual value of $6,000 and an estimated useful life of 10 years, placed in service on October 1 of the current fiscal year ending on December 31, 20Y5?

Straight-Line Method

The straight-line depreciation expense is calculated as the cost of the asset minus the salvage value, divided by the useful life.

Depreciation expense = ($42,000 - $6,000) / 10 = $3,600

For the year 20Y5, as the equipment was used from October to December, the depreciation expense is prorated. Hence, 3/12 x $3,600 = $900

Double-Declining-Balance Method

The double declining method calculates depreciation as a multiple of the straight-line depreciation factor.

Depreciation factor = 2 x (1 / useful life) = 2 / 10 = 0.2

Depreciation expense in 20Y5 = 0.2 x $42,000 = $8,400, but adjusting for the partial year use, it is $2,800

Depreciation expense in 20Y6 = Book value at the beginning x depreciation expense

Book value = $42,000 - $2,800 = $39,200

Depreciation expense in 20Y6 = $39,200 x 0.2 = $7,840