Question

# Archie Co. purchased a framing machine for \$45,000 on January 1, 2018. The machine is expected...

Archie Co. purchased a framing machine for \$45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of \$5,000 at the end of four years.

Using the double-declining balance method, accumulated depreciation and book value at December 31, 2019, would be:

 \$33,750 and \$11,250 \$32,000 and \$15,000 \$30,000 and \$15,000 None of the above \$11,250 and \$22,500

The correct answer is option (1) \$33,750 and \$11,250

EXPLANATION

Depreciation for 2018 -

​Depreciation=2×SLDP×BV

where:SLDP = Straight-line depreciation percent

BV = Book value at the beginning of the period​

SLDP = 1/ useful life

= 1 / 4 = 25%

Depreciation = 2 x 25% x \$45,000

= 50% x 45,000

= \$22,500

Remaning Book Value = \$45,000 - \$22,500 = \$22,500

Depreciation for 2019

Depreciation = 2 x 25% x \$22,500

= 50% x \$22,500

= \$11,250

Accumulated Depreciation as on 12/31/2019 = Depreciation for 2018 + Depreciation for 2019

= \$22,500 + \$11,250

= \$33,750

Book Value at December 31, 2019 = Cost of Machine - Accumulated Depreciation as of 12/31/2019

= \$45,000 - \$33,750

= \$11,250

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