Question

Bramble Corporation purchased machinery on January 1, 2022, at a cost of $256,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $30,600. The company is considering different depreciation methods that could be used for financial reporting purposes.

Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation End of Year Years Depreciable Cost x Depreciation Rate = Annual Depreciation Expense AccumulatedDepreciation Book Value 2022 $enter a dollar amount enter a Depreciation Rate in percentages % $enter a dollar amount $enter a dollar amount $enter a dollar amount 2023 enter a dollar amount enter a Depreciation Rate in percentages % enter a dollar amount enter a dollar amount enter a dollar amount 2024 enter a dollar amount enter a Depreciation Rate in percentages % enter a dollar amount enter a dollar amount enter a dollar amount 2025 enter a dollar amount enter a Depreciation Rate in percentages % enter a dollar amount enter a dollar amount enter a dollar amount $enter a total for the Annual Depreciation Expense column in dollars DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Years Book Value Beginning of Year × Depreciation Rate = Annual Depreciation Expense Accumulated Depreciation Book Value 2022 $enter a dollar amount enter a Depreciation Rate in percentages % $enter a dollar amount $enter a dollar amount $enter a dollar amount 2023 enter a dollar amount enter a Depreciation Rate in percentages % enter a dollar amount enter a dollar amount enter a dollar amount 2024 enter a dollar amount enter a Depreciation Rate in percentages % enter a dollar amount enter a dollar amount enter a dollar amount 2025 enter a dollar amount enter a Depreciation Rate in percentages % 1,400 * enter a dollar amount enter a dollar amount $enter a total for the Annual Depreciation Expense column in dollars

Answer 1

Straight line:

	Computation					End of Year
Years	Depreciable Cost	x	Depreciation Rate	=	Annual Depreciaton Expense	Accumulated Depreciation	Book value
2022	$225,400	x	25%	=	$56,350	$56,350	$199,650
2023	$225,400	x	25%	=	$56,350	$112,700	$143,300
2024	$225,400	x	25%	=	$56,350	$169,050	$86,950
2025	$225,400	x	25%	=	$56,350	$225,400	$30,600
					$225,400

Depreciable cost = Total cost - Salvage value = $256,000-$30,600=$225,400

Depreciation rate = [(256,000/4) ÷ 256,000] x 100 = 25%

Book value = Total cost (256,000) - Accumulated depreciation

Double declining:

	Computation					End of Year
Years	Book value beginning of Year	x	Depreciation Rate	=	Annual Depreciation Expense	Accumulated Depreciation	Book value
	(i)				(ii)		(iii)=(i)-(ii)
2022	$256,000	x	50%	=	$128,000	$128,000	$128,000
2023	$128,000	x	50%	=	$64,000	$192,000	$64,000
2024	$64,000	x	50%	=	$32,000	$224,000	$32,000
2025	$32,000	x	50%	=	$1,400*	$225,400	$30,600
					$225,400

Depreciation rate = 2 x Straight line depreciation rate = 2 x 25% = 50%

*At the end of the year annual depreciation expense should be adjusted to arrive ending book value as salvage value.

Hence, 32,000-30,600=$1,400