Question

On January 1, 2021, the Allegheny Corporation purchased equipment for $199,000. The estimated service life of the equipment is 10 years and the estimated residual value is $12,000. The equipment is expected to produce 248,000 units during its life.

Required:
Calculate depreciation for 2021 and 2022 using each of the following methods.

2. One hundred fifty percent declining balance. (Round final answers to the nearest whole dollar amount.)

Answer 1

Double Declining balance method.

>> Depreciation rate = 150 / Useful life = 150 / 10 = 15 %.

>> Depreciation for 2021 = $ 199,000 * 15 %

>> Depreciation for 2021 = $ 29,850.

>> Depreciation for 2022 = ( $ 199,000 - $ 29,850 ) * 15 %

>> Depreciation for 2022 = $ 25,373.