On April 1, 2000, Sanders Construction paid $10,000 for equipment with an estimated useful life of 10 years and a residual value of $2,000. This company uses the double-declining-balance method of depreciation and applies the half-year convention to fractional periods. In 2001, the amount of depreciation expense to be recognized on this equipment is:

$1,600
$1,440
$1,280
Some other amount


According to book, ans is $1800.

Carter and Dixie have capital account balances of $80,000 and $100,000, respectively, at the beginning of 2000. Their partnership agreement provides for interest on beginning capital account balances, 10%; salaries to Carter, $30,000, and to Dixie, $24,000; residual income or loss divided 60% to Carter and 40% to Dixie. Partnership net income for 2000 is $62,000. Neither partner made any additional investment in the partnership during 2000, but Carter withdrew $1,500 monthly and $1,000 monthly throughout 2000. The partnership balance sheet at December 31, 2000, should include:

Carter, Capital, $94,000
Carter, Capital, $100,000
Dixie, Capital, $30,000
Total partners’ equity, $242,000


Answer is that Carter's Capital, 94,000.

Can anyone explain?

Profit allocation

net income to be divided .............................. 62000
salary deductions:
Carter............................................ ..............(30000)
Dixie............................................. ..............(24000)
Interest allowance deductions:
Carter(10 % of 80000)...................................(8000)
Dixie(10 % of 100000)....................................(10000)
Residual Income............................................ ..(10000) {62-30-24-8-10}

Residual Income allocation
Carter(60 % of 10000)...................................(6000)
Dixie............................................. ...............(4000)

Carter Capital account

Opening capital of carter................................80000
Add: interest.......................................... ......8000
salary............................................ ......30000
Less: Residual loss.......................................(6000)
Drawings(12*1,500)............................ (18000)
Closing Capital of carter................................... 94000

Hello Fatima.
First you have to know what a double declining method of depreciation is.
The rate is found by straight line method. (Book Value - Salvage Value)/Periods.

(10,000-2,000)/10 = 800

800/8,000= 10% is the rate for straight line method.
Because it is double declining method, we use double this rate which becomes 20%.
Now Half Year Convention says no matter what month a Depreciable Property is bought, it will be depreciated for half the year. The property was bought in April.

In Double Declining method we use the Book Value 10,000 * 20% =2,000 for the first year. We pay half for the first year i.e. 1,000.

Book Value Depreciation Rate Expense
10,000 20% 1,000 (half for first year)
9,000 20% 1,800

This is how we get 1,800 as answer