Question

suppose a company purchases computers for $22,000. they are calculated to have a useful life of 5 years and a salvage value of $2000. according to the government, the cca rate to be used for computers is 55%. what would be the depreciation expense in year 2 of owning these computers using both the straight-line method and the declining-balance method. what is... straight-line: $4,000.00 declining-balance: $5,445.00 maksym nastenko maksym.nastenko@student.tdsb.on.ca

Explanation:

Step1: Straight - Line Depreciation

The formula for straight - line depreciation is $\text{Depreciation Expense}=\frac{\text{Cost}-\text{Salvage Value}}{\text{Useful Life}}$.
Given that the cost of the computers is $\$22,000$, the salvage value is $\$2000$, and the useful life is 5 years.
Substitute the values into the formula: $\frac{22000 - 2000}{5}=\frac{20000}{5} = 4000$. So the straight - line depreciation expense per year (including year 2) is $\$4000$.

Step2: Declining - Balance Depreciation

The formula for declining - balance depreciation is $\text{Depreciation Expense}=\text{Book Value at the start of the year}\times\text{CCA rate}$.
First, find the book value at the start of year 1: The initial cost is $\$22,000$, so the book value at the start of year 1 is $\$22,000$.
Depreciation expense for year 1: $22000\times0.55 = 12100$.
Book value at the start of year 2: $22000- 12100=9900$.
Depreciation expense for year 2: $9900\times0.55 = 5445$.

Answer:

Straight - Line Depreciation Expense in Year 2: $\$4000.00$; Declining - Balance Depreciation Expense in Year 2: $\$5445.00$