Question

(6 points) A company purchased a machine costing $750,000 (plus 5% in taxes) on January 1, 2015. Its estimated salvage value is $80,000 and its expected life is 10 years. It cost the company $90,000 to install and make the machine ready for full use. Instructions Record the depreciation expense by each of the following methods. (a) (3 points) Straight-line for 2015 (b) (3 points) Double-declining balance for 2017

Answer 1

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A company
Purchase Cost of Equipment	750,000.00
Add: taxes	37,500.00
Add: Installation costs	90,000.00
Cost of Equipment	877,500.00	A
Residual Value	80,000.00	B
Depreciable Value	797,500.00	C=A-B
Answer 1
Straight Line Method
Depreciable Value	797,500.00	See C
Life	10.00	D
Straight Line depreciation (Per Year)	79,750.00	E=C/D
So depreciation expense for 2015 is $ 79,750.

Answer 2				M	N=M*L
Double Declining Method			Table	Cost/Opening Book Value	Depreciation Expense	Accumulated depreciation	Net Book Value
Cost of Equipment	877,500.00	See A	1-Jan-15	877,500.00	-	-	877,500.00
Life	10.00	See D	Year 2015	877,500.00	175,500.00	175,500.00	702,000.00
Annual depreciation	87,750.00	J=A/D	Year 2016	702,000.00	140,400.00	315,900.00	561,600.00
Depreciation rate	10.00%	K=J/A	Year 2017	561,600.00	112,320.00	428,220.00	449,280.00
Double Depreciation %	20.00%	L=K*2
So depreciation expense for 2017 is $ 112,320.