Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $84,200. The machine's useful life is estimated at 20 years, or 391,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,100 units of product. 

Exercise 10-6 Double-declining-balance depreciation LO P1 

Determine the machine's second-year depreciation using the double-declining-balance method.

Double-declining-balance Depreciation
	Choose Factors:	x	Choose Factor(%)	=	Annual Depreciation Expense
		x		=	Depreciation expense
First year's depreciation		x		=
Second year's depreciation		x		=

Answer 1

	Double Declining Balance Depreciation
	Choose Factors:	x	Choose Factor(%)	=	Annual Depreciation
	Beginning book value	x	Double the straight-	=	Depreciation expense
			line rate
First year's depreciation	84,200.00	x	10%	=	8,420.00
Second year's depreciation	75,780.00	x	10%	=	7,578.00
Explanation:
Double-declining-balance rate = (100% / 20 years) × 2 = 10% per year
First year’s depreciation = $84,200 × 10% = $8,420
Book value at beginning of second year = $84,200 – $8,420 = $75,780
Second year’s depreciation = $75,780 × 10% = $7,578