Question

A machine that cost $170,000 has an estimated residual value of $17,000 and an estimated useful life of four years. The company uses double-declining-balance depreciation. Calculate its book value at the end of year 3. (Do not round intermediate calculations.)

Answer 1

Book value at the end of Year 3 S 21,250 Working Notes: Machine Cost = $170,000 Residual value = $17,000 Useful Life = 4 Years Depreciation rate = 1/4*100*2 = 50% Depreciation for Yaer 1 = $170,000*50% = $85,000 Depreciation for Year 2 = ($170,000-$85,000)*50% = $42,500 Depreciation for Year 3 = ($170,000-$85,000-$42,500)*50% = $21,250 Book value at the end of year 3 = $170,000-$85,000-$42,500-$21,250 = $21,250