Question

Earth Lovers Inc, the world's largest producer of environmentally friendly products and services, purchased a new tree-hugging machine. The cost was $2,500,000. The estimated life in years is 10. The estimated life in units of production is 1,000,000 hugs. The estimated residual (salvage) value at the end of its useful life is $20,000.

Assuming the company uses the double-declining balance method of depreciation, how much depreciation expense will be incurred in years 1,2,3? Show working

Answer 1

- + Earth Lovers Inc. The cost of machine Estimated life in year Rosigual value $ 2,500,000 10 year $ 20,000 - pouble Declinjag bol ance method depaeciahon Expense: I year year 2 Yeas 3 $500,000 $ 4,00,000 $3,20,000 Explona Hon: i Depreciation Rate = 100 x 2 1 x Useful life. 2 x 200 x 2 al 20% yeas Beg. Balance Dep. EXP Ending Balana 9 2 500,000 2 20,00,000 2,500,000 X 207- $ 500,000 20,00,000 X 207 F400,000 16,00,000 X 2011 $ 320,000 12 500,000 - 509000) -20,00000 (20,00.000 - 100,00 $16,00,000 C1600,000 - 320,000) - 12.80,000 16,00,000