Problem #2: Depreciation Methods (SHOW YOUR WORK BY MAKING PROPER TABLE)
CALCULATE ALL STEPS! (BEGINNING BOOK VALUE, DEPRICIATION EXPENSE, ACCUMULATE D.E and BOOK VALUE)
Numo Company purchased a new machine on March 1, 2020, at a cost of $145,000. Rate is 40%.The company estimated that the machine will have a salvage value of $25,000.The machine is expected to be used for 20,000 working hours during its 5-year life.
Instructions Compute the depreciation expense under the following methods for the year indicated.
(a) Straight-line for 5 years
(b) Declining-balance using double the straight-line rate for 5 years.
a)In straight line method of depreciation, the asset is depreciated equally throughout its life. | ||||||||
Cost of the machine = $145000 | ||||||||
Salvage Value = $25000 | ||||||||
Amount to be depreciated = $120000 | ||||||||
Depreciation under straight line method = $120000/5 years | ||||||||
= $24000 per year | ||||||||
b)Double declining balance method = 2* Straight line depreciation percentage * Beginning Book Value | ||||||||
Straight line depreciation percentage = 20% as it is for 5 years. |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Beginning book value | 145000 | 87000 | 52200 | 31320 | 25000 |
Depreciation expense | 58000 | 34800 | 20880 | 6320 | - |
Ending Book value | 87000 | 52200 | 31320 | 25000 | 25000 |
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