Question

Global Manufacturing Company purchased new equipment on April 25, 2021, at a cost of $80000. 

Useful life of this equipment was estimated at 4 years, with an estimated residual value of $5000. For 

income tax purpose, this equipment is classified as “5-years property”.

Instructions: Compute the annual depreciation expense for each year until this equipment becomes 

fully depreciated under each of depreciation method listed below.

i) Straight-line, with depreciation for fractional years rounded to the nearest whole month.

ii) 200%- declining-balance, with the half-year convention

Answer 1

i)

2021

$$\frac{80000-5000}{44}\times8=13636$$

2022-2024

$$\frac{80000-5000}{44}\times12=20455$$

ii)

2021

$$\frac{80000-2*5000}{7}=10000$$

2022

$$\frac{80000-2*10000}{6}=10000$$

$$\frac{80000-2*10000}{5}=12000$$

2023

$$\frac{80000-2*12000}{4}=14000$$

$$\frac{80000-2*14000}{3}=17333$$

2024

$$\frac{80000-2*17333}{2}=22667$$

$$\frac{80000-2*22667}{1}=34666$$