Question

Depreciation Methods

A machine costing $251,800 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $3,400. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

a. Straight-line:
Year 1:	$Answer
Year 2:	Answer
Year 3:	Answer
Year 4:	Answer
b. Double-declining balance:
Year 1:	$Answer
Year 2:	Answer
Year 3:	Answer
Year 4:	Answer

Answer 1

	For year 1 the depreciation will be charged for 8 months only
	for year 4 the depreciation charged will be for 4 months remaining
	straight line depreciation
	(251,800 - 3,400)/3
	82800
a.	Straight-line
	year 1	55200
	year 2	82,800
	year 3	82,800
	year 4	27600
b.	Double declining
	rate = 1/3*2
	0.666667
	or 66.67%
	year	beginning	dep	book
		bal		value
	1	251800	111911	139889
	2	139889	93259	46630
	3	46630	31087	15543
	4	15543	12143	3400