Question

ed fe of the machinery is 4 years, with an etted salvage valae at the nd of tht peried of $2,000 he company is considering dferent deprediation methods that Concard Corporation purchaved machinery on Janry 1, 2017, could be used for finandal repoting uposes st of30000 The Prpare separate deprediation schedules for the achinery uing the straig se mthd nd the decining balance method uing double the sbraight ne rate STRAIGHT LINE DE PRECIATION red of Year wn Tears Depreciable Cent Depreciation Rabe Aal Depreciatioe Expemve Accemalated Depredation Bock Valee 61er

Answer 1

STRAIGHT LINE DEPRECIATION RATE = 100%/4useful years

=25%

years	depreciable cost	depreciation rate	annual depreciation expense	accumulated depreciation	book value
1	294000[320000-26000]	25%	73500	73500	246500[320000-73500]
2	294000	25%	73500	147000[73500+73500]	173000[246500-73500]
3	294000	25%	73500	220500[147000+73500]	99500[173000-73500]
4	294000	25%	73500	294000[220500+73500]	26000[99500-73500]

2. double declining rate

=100/ 4 years *2

=50%

years	depreciable cost	depreciation rate	annual depreciation expense	accumulated depreciation	book value
2017	320000	50%	160000	160000	160000[320000-160000]
2018	160000	50%	80000	240000[160000+80000]	80000[160000-80000]
2019	80000	50%	40000	280000[240000+40000]	40000[80000-40000]
2020	40000	50%	14000	294000[280000+14000]	26000
	As we know that book value is 26000$ at year end in 2020 depreciation would be adjusted accordingly [40000-26000]14000$

2017 straight line would result in higher income as the depreciation is lower

double declining method would result in lower income as the depreciation is higher