Question

1.) Piggy Company purchased a machine for $23,179. The machine is expected to last for 6 years or 103,768 machine-hours. At the end of the machine's useful life, it can be scrapped for an estimated $1,195.

Calculate the total accumulated depreciation after the second year's depreciation expense has been recorded using the double-declining balance method of depreciation. Round your answer to the nearest dollar.

2.) Rooster Company purchased a machine for $44,393. The machine is expected to last for 16 years or 196,068 machine-hours. At the end of the machine's useful life, it can be scrapped for an estimated $1,686.

Calculate the machine's book value after the second year's depreciation expense has been recorded using the straight-line method of depreciation. Round your answer to the nearest dollar.

Answer 1

(1) double declining method ignores salvage value. asset is depreciated at double rate on reducing asset balance.

double declining rate = 100%/ useful life * 2

=100/6 *2

=33.33%

years	beginning book value	depreciation rate	depreciation	book value at the end
1	$23,179	33.33%	$7,726[$23,179*33.3333%]	$15,453[23179-7726]
2	$15,453	33.33%	$5,150[15453*33.33%]	$10,303[15453-5150]

as you can see that book value keep on reducing every year and double declining rate is applied to the reduced book value.

total accumulated depreciation after the second year's depreciation expense has been recorded using the double-declining balance method of depreciation =[7726+5150] = $12,876

(2) straight line depreciation method depreciates asset by same amount every year. salvage value is deducted from cost and divided by useful life.

straight line depreciation = (cost - salvage) / useful life

=($44,393-$1,686/16years

=$2,669 is the annual depreciation as per straight line method,

years	Beginning book value	depreciation	ending book value
1	$44,393	$2,669	$41,724[44393-2669]
2	$41,724	$2,669	$39,055[41724-2669]

the machine's book value after the second year's depreciation expense has been recorded using the straight-line method of depreciation. = $39,055