Sanders Construction Co. specializes in building replicas of
historic houses. Brett Sanders,...

Question

Sanders Construction Co. specializes in building replicas of
historic houses. Brett Sanders, president of Sanders Construction,
is considering the purchase of various items of equipment on July
1, 2014 for $300,000. The equipment would have a useful life of 5
years and no residual value. Brett is considering depreciating the
equipment by the straight-line method or the double declining
balance method. Answer the following questions: 1. Calculate the
depreciation for the first year using the straight-line method and
the Double declining balance method, show your work. 2. In a short
paragraph, explain the straight-line depreciation method and the
Double declining balance method. 3. In your opinion, which method
would be better for the company to use, why? Explain your
answer.

Robert · Accepted Answer

Solution 
Cost of Equipment  3,00,000 
Useful Life 5 years
Under Straight Line Method
Depreciation Expenses per Year 
          = (Cost of Equipment - Salvage Value)/ Useful Life 
                        =(300,000-0)/5 
 $   60,000 
 The machine is put to use on July 1, so 6 months depreciation expenses will be recorded
Depreciation Expense for First Year 
= 60,000/12 * 6 
$30,

Sanders Construction Co. specializes in building replicas of historic houses. Brett Sanders, president of Sanders Construction, is considering the purchase of various items of equipment on July 1,...

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