Question

Frey, Inc. purchased a machine for $450,000 on January 2, 2017. The machine has an estimated useful life of 4 years and a salvage value of $50,000. The machine is being depreciated using the sum-of-the-years-digits method. The December 31, 2018 asset balance, net of accumulated depreciation, should be Select one: O a. $290,000 b. $270,000 O c. $170,000 O d. $90,000 O e. $120,000 Rye Co. purchased a machine with a four-year estimated useful life and an estimated 10% salvage value for $80,000 on January 1, 2012. In its income statement, what would Rye report as the depreciation expense for 2014 using the double-declining balance method? Select one: O a. $9,000 O b. $10,000 O c. $18,000 d. $20,000 O e. $40,000

Answer 1

Answer:

c. $170000

Particulars Amount($)

Cost of machine 450000

Less; Depreciation 160000

($400000*4/(4+3+2+1))

Closing value of machine on 31-12-2017 290000

Less: Depreciation 120000

( $400000*3/(4+3+2+1))

Closing value of machine on 31-12-2018 170000  

Calculation of depreciation expense for 2014 using the double decliing balance method:

Straight line depreciation rate = 100%/4 = 25%

Double declining depreciation rate = 25%*2 = 50%

Particulars	2012($)	2013($)	2014($)
Opening value of machine	80000	40000	20000
Less: Depreciation expense	40000 (80000*.5)	20000 (40000*.5)	10000 (20000*.5)
Closing value of machine	40000	20000	10000

Hence depreciation expense for 2014 is $10000

Hence answer b.$10000