Question

On January 1, 2020, Company purchased a new machine
for $294,000. The machine was assigned a salvage value of
$8,360 and an expected life of 20 years. Company
will use the double-declining balance method to calculate
depreciation on the machine.

On December 31, 2022, the machine was sold for $56,000 cash.

Calculate the amount of the loss recorded on the sale. Do
not place a minus sign in front of your answer.

Answer 1

Double Declining Balance Method :-

Depreciation rate = (2/Useful life ) * 100 => (2/20)*100 =10%.

Depreciation expense = Cost of asset * Depreciation Rate.

31 Dec 2020 = $294,000 * 10% = $29,400.

31 Dec 2021 =($294,000 - 29,400) * 10% = $26,460.

31 Dec 2022 = ($294,000 - 29,400 - 26,460)*10% = $23,814.

Calculation of Book Value on 31 December 2022 :- => (Cost - Depreciation for 3 years) => ($294,000 - $29,400 - $26,460 - $23,714) =$214,426.

Loss on sale of machine = Book Value - Sale value. =>$214,426 - $56,000 = $158,426.

If you have any doubts please comment on the answer.