Question

A machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of four years. The company uses double-declining-balance depreciation. Required:

1. Calculate the machine's depreciable cost.

2. Calculate the machine's depreciation expense for each year.

3. Calculate the machine's accumulated depreciation and book value at the end of each year.

Answer 1

1) Machine's depreciable cost = opening value of mahcine - Salvage value

= $400,000 - $ 40,000

= $ 360,000

2) Machine's depreciable expenses for each year Column C in above table.

Year DepreciableExpenses

year 1 $200,000

year 2 $100,000

year 3 $50,000

year 4 $10,000

3) Machine's accumlated depreciation is column D and book value at the end of each year is column E

Year Accumlated depreication Book value at the end of each year

year 1 $ 200,000 $ 200,000

year 2 $300,000 $ 100,000

year 3 $50,000 $ 350,000

year 4 $10,000 $ 360,000