Question

Concord Corporation purchased a new machine for $237,500. It is estimated that the machine will have a $23.750 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used. Prepare a depreciation schedule that shows the annual depreciation expense on the machine for its 5-year life. End of Year Book Value Beginning of Year Annual Depreciation Expense Accumulated Depreciation Book Value End of Year Year 1 $ 7,030 Adjusted to $7,030 because ending book value should not be less than expected salvage value

Answer 1

Depreciation Schedule under Double Declining Balance

Year	Book Value – Beginning of the year ($)	Depreciation Rate	Annual Depreciation Expense ($)	Accumulated Depreciation ($)	Book Value – End of the year ($)
1	2,37,500	40%	95,000	95,000	1,42,500
2	1,42,500	40%	57,000	1,52,000	85,500
3	85,500	40%	34,200	1,86,200	51,300
4	51,300	40%	20,520	2,06,720	30,780
5	30,780	40%	7,030	2,13,750	23,750

*Depreciation Rate = 2 x Straight line rate

= [1 / Usefull life]

= 2 x [1/5 Years]

= 40%