Question

On 1/1/18 Meganco purchased a new lathe for $400,000 installed.

            The physical life of the lathe is 10 years with a salvage value of $20,000 at the end of that time period. The lathe was purchase for a contract that will provide revenue to Meganco for 5 years. The lathe will be sold at the end of the contract for $50,000.

            Required:       Make the required journal entry on 12/31/18 and

                                    12/31/19 assuming that the lathe is depreciated

                                    using 200% double declining balance.

Answer 1

Depreciation under Double declining balance method = (Cost - Accumulated depreciation) / Useful life * 2

Depreciation for 2018 = ($400,000 - $0) / 10 * 2 = $80,000

Depreciation for 2019 = ($400,000 - $80,000) / 10 * 2 = $64,000

12/31/18	Depreciation expense	$80,000
	Accumulated depreciation		$80,000
12/31/19	Depreciation expense	$64,000
	Accumulated depreciation		$64,000