Calculate Depreciation for Sandblasting Equipment

Depreciation is an important aspect of accounting, especially when it comes to valuing assets over their useful life. In the case of the sandblasting equipment acquired at a cost of $109,000, with an estimated residual value of $7,000 and an estimated useful life of 5 years, we need to calculate the depreciation for 2015 and 2016 using both straight-line and double declining-balance methods.

Straight-Line Method:

The straight-line method is a simple way to calculate depreciation by spreading the cost of the equipment evenly over its useful life. To determine the depreciation amount, we subtract the residual value from the cost of the equipment and then divide it by the useful life.

For 2015: ($109,000 - $7,000) / 5 = $20,400

For 2016: ($109,000 - $7,000 - $20,400) / 5 = $16,520

Double Declining-Balance Method:

The double declining-balance method is an accelerated depreciation method that allows for larger depreciation expenses in the early years of an asset's life.

For 2015: Straight-line depreciation: $20,400 Depreciation using double declining-balance: $20,400 x 2 = $40,800

For 2016: Book value for 2015: $109,000 - $40,800 = $68,200 Depreciation for 2016: ($68,200 - $7,000) x 2 / 5 = $13,840