Question

2.- U. Question 4: Calculate depreciation. A machine cost $550,000 on April 1, 2015. Its estimated residual value is $50,000 and its expected life is 4 years. Instructions Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used using Double-Declining Balance method as follows: Years B.V at the first of Rate Dep. Expense Ace. Dep. Book Value each year 2015 2016 550,000 0.5% 275,000 27000 275,000 | 275,000 05 137, 5.0 472,660 137, 800 1137,500 9.5 68,750 480/250 68,750 68.750 10.5 139,375 515, 625 34,375 2017 | 2018 15) (550,000) x 0.- 215,000 e olb) (550,000 - 275,000 xe5= 137,500 17) (550,000 - 275,000-137, 560 ) x 0.5= 68,750 018) (550,000 - 2/15,000 -137, 500 - 68,750) x 0. 52 34,37 Record the Journal Entry for 2016 depreciation expense: D = DepexP (= act, dep 13 Boo 137,500

Answer 1

For the first year depreciation would be provided for 9 months (April-Dec) only.

DDB rate = 100%/useful life * 200%

= 100/4*200%

=50%

Years	BV at the first each year	Rate	Depreciation expense	Accumulated depreciation	Book value
2015	$550,000	50%	$206,250($550,000*50%)/12*9months	$206,250	$343,750($550,000-$206,250)
2016	$343,750	50%	$171,875($343,750*50%)	$378,125(206,250+171,875)	$171,875($343,750-171,875)
2017	$171,875	50%	$85,938($171,875*50%)	$464,063(378,125+85,938)	$85,937($171,875-$85,938)
2018	$85,937	50%	$35,937*	$500,000(464,063+35,937)	$50,000

* As we know that residual value is $50,000 , depreciation for the last year would be adjusted to derive $50,000 as Book value.

($85,937-$50,000) = $35,937 depreciation

Journal entry for 2016 depreciation expense

		debit	credit
31st Dec. 2016	Depreciation expense-Machine	$171,875
	Accumulated depreciation-Machine		$171,875