Question

10. Rye Co. purchased a machine with a five-year estimated useful life and no salvage value for $900,000 on January 1, 1992. In its income statements, what would Rye report as the depreciation expense for 1994 (year 3 of the asset) using the double-declining-balance method?

Round up number on the nearest dollar and enter as a whole number.

Thank you!!

Answer 1

Ans.	Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 5
		0.40
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
	Year	Reamining value at the beginning (a)	Depreciation (b = a*0.40)	Net book value (a - b)
	1	$900,000	$360,000	$540,000
	2	$540,000	$216,000	$324,000
	3	$324,000	$129,600	$194,400
	*Net book value = a - b
	*Depreciation =   Remaining value at the beginning - Residual value
	*Net book value of previous year is beginning value for current year.
	So the depreciation expenses for Year 3 is $129,600.