Question

Martin Company purchases a machine at the beginning of the year at a cost of $85,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $7,000 salvage value. Depreciation expense in year 4 is: Multiple Choice Ο Ο Ο Ο Ο

Answer 1

Requirement Computation of Depreciation under Double Declining Balance method: Cost Less : Salvage Value Depreciable value (A) Life Yearly depreciation - 78000/4 $ 85,000.00 $ (7,000.00) $ 78,000.00 4 years $ 19,500.00 25.00% Annual Staright line depreciation rate = 19500/78000 Double Declining factor Double Declining Annual rate 200% 50.00% Year Beginning Balance Double Declining Annual rate Annual depreciation amount Ending Balance 1 $ 85,000.00 50.00% $ 42,500 $ 42,500 2 $ 42,500.00 50.00% $ 21,250 $ 21,250 3 $ 21,250.00 50.00% $ 10,625 $ 10,625 4 $ 10,625.00 3,625 $ Since Life is 4 years, Balance at beginning of 4th year is $10625 and salvage value is $7000 Depreciation expense will be $3625 only Option (A) is Correct