Question

Problem 9-09A Culver Corporation purchased machinery on January 1, 2022, at a cost of $288,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $33,800. The company is considering different depreciation met Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation Years Depreciable Cost x Depreciation Rate = Annual Depreciation Expense 2022 End of Year Accumulated Depreciation Book Value 2023 2024 2025 DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Accumulated Depreciation Years Book Value Beginning of Year x Depreciation Rate = Annual Depreciation Expense Book Value 2022 2023

Answer 1

Culver corporation Calculation of Depreciation exp. Under SLM Method Acquisition cost - Salvage value /useful life (288000 - 33800) Depreciable cost Dep. Rate (1/4 = 25 %) Dep. Expense Asset cost 288000 At acquisition 2022 2023 2024 2025 254200 254200 254200 254200 25% 25% 25% 25% 63550 63550 63550 63550 254200 End of year Accumulated dep B ook value 288000 63550 224450 127100 160900 190650 97350 254200 33800 Calculation of Depreciation exp. Under Double declining balance Depreciation for the year Opening Book value (a) Depreciation rate(b) (see W.N) Dep. Expense (a*b) Asset cost 288000 Accumulated dep. At acquisition 2022 2023 2024 2025 288000 144000 72000 36000 50% 50% 50% Adjusted to salvage value 144000 72000 36000 2200 254200 144000 72000 36000 2200 Closing Book value 288000 144000 72000 36000 33800 Working Note WN 1) - In DDB method, Salvage value is not considered. SLM rate = 25% DDB rate = 25*2 = 50 % SLM method would report higher 2022 income as depreciation charged is less under this method for the yaer 2022 and 2023.