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Problem #2: Depreciation Methods (SHOW YOUR WORK BY MAKING PROPER TABLE) CALCULATE ALL STEPS! (BEGINNING BOOK...

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.

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Homework Answers

Answer #1
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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