Question

Depreciation Methods A machine costing $180.000 was purchased May 1. The machine should be obsolete after four years and therefore, no longer useful to the company. The estimated salvage value is $15,000 Calculate the depreciation expense for each year of is expected us i ng each of the following depreciation methods: (a) straight-line, double dening balance. For double declining balance, do not round until your final e Round your final anwers to the nearest dollar Check

Answer 1

Given

Cost of the asset = $180,000

Useful life = 4 years

Salvage value = $15,000

Depreciation for the year as per straight line method =

(cost-salvage value) / useful life of the asset

= (180,000 - 15,000)/4

= 41,250 per year

Depreciation schedule

Year	Depreciation	WDV
Year 1	(41,250)*8/12 = 27,500	152,500
Year 2	41,250	111,250
Year 3	41,250	70,000
Year 4	41,250	28,750
Year 5	(41,250)*4/12 = 13,750	15,000

Double declining balance method

Rate of depreciation = 1/useful life * 100

= 1 / 4 * 100 = 25%

Double declining balance depreciation rate formal = 2 * depreciation rate * WDV of the asset

Depreciation schedule

Year	Depreciation	WDV
Year 1	(180,000 * 25% *2) * (8/12) = 60,000	120,000
Year 2	(120,000 * 25% *2) = 60,000	60,000
Year 3	(60,000 * 25% * 2) = 30,000	30,000
Year 4	(30,000 * 25% * 2) = 15,000	15,000