### Depreciation Calculations for a Storage Tank and Diesel-powered Tractor**Scenario 1: Storage Tank**A storage tank was acquired at the beginning of the fiscal year with the following details:- **Cost:** $586,000- **Estimated Residual Value:** $52,000- **Estimated Useful Life:** 10 yearsDetermine the following:**a. Annual Depreciation Using the Straight-Line Method:**The straight-line method calculates depreciation by dividing the depreciable amount by the useful life. The formula is:\[ \text{Depreciable Amount} = \text{Cost} - \text{Residual Value} \]\[ \text{Annual Depreciation Expense} = \frac{\text{Depreciable Amount}}{\text{Useful Life}} \]**b. Depreciation for Years 1, 2, and 3 Using the Double-Declining Balance Method:**The double-declining balance method doubles the straight-line depreciation rate. It does not deduct the residual value from the cost when calculating annual depreciation. The formula is:\[ \text{Depreciation Rate} = \frac{2}{\text{Useful Life}} \]\[ \text{Depreciation Expense} = \text{Beginning Book Value} \times \text{Depreciation Rate} \]**Scenario 2: Diesel-powered Tractor**A diesel-powered tractor has:- **Cost:** $216,000- **Estimated Residual Value:** $39,000- **Expected Useful Operating Life:** 45,000 hoursDuring February, the generator operated for 860 hours. Determine the monthly depreciation:\[ \text{Hourly Depreciation Rate} = \frac{\text{Cost} - \text{Residual Value}}{\text{Total Estimated Operating Hours}} \]\[ \text{Depreciation for February} = \text{Hourly Depreciation Rate} \times \text{Hours Operated in February} \]**d. Journal Entry for Depreciation (Related to Scenario c):**Prepare the journal entry to record the depreciation calculated for February:1. **Debit:** Depreciation Expense2. **Credit:** Accumulated DepreciationThese entries ensure the financial records accurately reflect the decrease in value of the tractor due to usage during the period.

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Description: ### Depreciation Calculations for a Storage Tank and Diesel-powered Tractor**Scenario 1: Storage Tank**A storage tank was acquired at the beginning of the fiscal year with the following details:- **Cost:** $586,000- **Estimated Residual Value:** $52

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A storage tank acquired at the beginning of the fiscal year at a cost of $586,000 has an estimated residual value of $52,000 and an estimated useful life of 10 years. Determine the following: a. the amount of annual depreciation by the straight-line method and b. the amount of depreciation for the first, second, and third years computed by the double-declining-balance method. C. A diesel-powered tractor with a cost of $216,000 and estimated residual value of $39,000 is expected to have a useful operating life of 45,000 hours. During February, the generator was operated 860 hours. Determine the depreciation for the month. d. Prepare the journal entry to record the depreciation under c. above.

A storage tank acquired at the beginning of the fiscal year at a cost of $586,000 has an estimated residual value of $52,000 and an estimated useful life of 10 years. Determine the following: a. the amount of annual depreciation by the straight-line method and b. the amount of depreciation for the first, second, and third years computed by the double-declining-balance method. C. A diesel-powered tractor with a cost of $216,000 and estimated residual value of $39,000 is expected to have a useful operating life of 45,000 hours. During February, the generator was operated 860 hours. Determine the depreciation for the month. d. Prepare the journal entry to record the depreciation under c. above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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