A company acquired machinery for $90,000. The machinery's estimated useful life is 8 years and estimated...

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A company acquired machinery for $90,000. The machinerys estimated useful life is 8 years and estimated residual value is $1

business accounting

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Answer 1

Answer #1

		Straight -Line		Declining-Balance at Twice the Straight-Line rate (DDB)
		Annual depreciation	Book Value	Annual depreciation	Book Value
At acquisition		0	$ 90,000	0	$ 90,000
Year 1		$ 10,000	$ 80,000	$ 22,500	$ 67,500
Year 2		$ 10,000	$ 70,000	$ 16,875	$ 50,625
Year 3		$ 10,000	$ 60,000	$ 12,656	$ 37,969

working:

Straight line depreciation	=	(Cost - Salvage value)/Useful life
	=	(90000-10000)/8
	=	$ 10,000

Double declining :

Straight line depreciation rate	=	1/useful life
	=	1/8
	=	12.50%

Double declining rate	=	2*12.50%
	=	25.00%

Depreciation Schedule:

Year	Beginning book value	Depreciation expense	Ending Book Value
	a	b=a*25%	c=a-b
1	$ 90,000	$ 22,500	$ 67,500
2	$ 67,500	$ 16,875	$ 50,625
3	$ 50,625	$ 12,656	$ 37,969

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Answer 2

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