Question

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

Answer 1

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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