Essay About Straight Line Depreciation Method And Useful Life

Balls and Bats, Inc
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Balls and Bats, Inc.Marisol SmithAIU06/26/2016DraftDepreciation is an organized and balanced method of allocating the cost of physical possessions throughout the lifetime of the properties or assets. Depreciation is a course of distribution. Some of the methods utilize on the depreciation are: The Straight Line Depreciation method, declining balance of Depreciation and/or Double Declining Balance of Depreciation.Balls and Bats, Inc.Balls and Bats, Inc. purchased equipment on January 1, 2005, at a cost of $100,000. The estimated useful life is 4 years with a salvage value of $10,000.Prepare two different depreciation schedules for the equipment – one using the double-declining balance method, and the other using the straight-line method. (Round to the nearest dollar).Prepare two different depreciation schedules for the equipment – one using the double-declining balance method, and the other using the straight-line method. (Round to the nearest dollar).In order to get the Double Declining balance depreciation it is needed to use the straight line depreciation method.Computing the cost as of $100,000.00 with a salvage value of $10,000.00 and useful life 4 years.To gather the annually depreciation the calculation is as follow: base- salvage value10,000.00 – 10,000.00= $90,000.00 total amount depreciatedThen the total amount depreciated will be divided by the useful life years$90,000.00/4= $22,500.00Annually depreciation is $22,500.00Now to get the straight line depreciation it needs to divide $22,500 by the total depreciation 22,500/90,000=0.25%The straight line depreciation of $22,500 is 0.25%YearCalculationDepreciation ExpenseAccumulated DepreciationNet Book Value01/01/05$100,000.0001/01/06100,000-10,000/4$22,500.00$22,500.00$77,500.0001/01/07100,000-10,000/4$22,500.00$22,500.00$55,000,0001/01/08100,000-10,000/4$22,500.00$22,500.00$32,500.0001/01/09100,000-10,000/4$22,500.00$22,500.00$10,000.00Now to get to the double declining depreciation we will do the following calculation:Double Declining Balance Depreciation Method FormulaDepreciation Base * (2 * 100% / Useful Life of Asset in Years)100,000 X 2X100%/4=50,000.00 2005- First year 50,000X2x100%/4= $25,000 2006- second year25,000X2X100%/4=$12,500 2007 -third year12,500X2X100%/4=$6,250 2008- fourth yearThe Double declining depreciation is 50%YearCalculationDepreciation ExpenseAccumulated DepreciationNet Book Value01/01/05$100,000.0001/01/0650% X 100000$50,000.00$50,000.00$50,000.0001/01/0750% X 50000$25,000.00$75,000.00$25,000.0001/01/0850% X 25000$12,500.00$87,500.00$12,500.0001/01/0950% X 12500$6,250.00$93,750.00$6,250.00Determine which method would result in the greatest net income for the year ending    December 31, 2005.Taking under consideration the results of the Straight Line Depreciation Method and the Double Declining Depreciation Method that the most effective method to used it will  be the Straight Line Method due to the fact that in this case the Savage Value is under the Base Book Value and it should not be lower instead can be higher or equal.