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Determine the depreciation expense and the carrying amount

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Reference no: EM132354622

Question

On July 2, 2018, Japan Inc. purchased equipment for $720,000. This equipment has an estimated useful life of six years and an estimated residual value of $30,000. Depreciation is taken for the portion of the year the asset is used. The asset is a Class 8 asset with a maximum CCA rate of 20%. Japan has a December year end.

Required:

a) Determine the depreciation expense and the carrying amount (net book value) of the equipment for 2018 and 2019 using the:

Double declining-balance method.

Capital cost allowance method (using maximum rate)

b) Instead, assume Vicuna had used straight-line depreciation during 2018 and 2019. During 2020, the company determined that the equipment would be useful to the company for only one more year beyond 2020. Residual value is estimated at $40,000. Calculate the amount of depreciation expense for the 2020 income statement.

Reference no: EM132354622

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