Question

Depreciation Methods

A machine costing $230,400 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $5,400. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

a. Straight-line:
Year 1:	Answer
Year 2:	Answer
Year 3:	Answer
Year 4:	Answer
b. Double-declining balance:
Year 1:	Answer
Year 2:	Answer
Year 3:	Answer
Year 4:	Answer

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Answer 1

Cost of Asset 230400 Residual Value 5400 Useful Life 3 Depreciable Asset Cost - Residual value 225000 Depreciable Asset Depreciation p.a Depreciable asset / Useful Life Depreciation p.a = 75000 Straight line Method Accumulated Depreciaton 50,000 $180,400 125,000$105,400 200,000 $ 225,000 $ 225,000 $ Depreciation Book value Year expenses 50,000 $ 75,000 $ 75,000 $ 25,000$ 225,000 $ 1 2 30,400 4 5,400 Total 5,400 SS

Depreciation rate (1*200 /useful life ) 67% Double Decline Method Accumulate Book value at Beginning of the Depreciation Depreciation d Depreciaton Book value $102,400 $ 102,400$128,000 85,333 187,733 $42,667 28,444 216,178$ 8,822 225,000 $ $225,000$ 225,000$ Year rate year expenses 1 230,400 66.67% 128,000 2 66.67% 3 42,667 66.67% 14,222 4 14,222 62.03% 5,400 Total 5,400 S