Question

SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine...

SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine has an expected useful life of four years and an expected salvage value of $40,000. The company expects to use the machine for 1,300 hours in the first year, 1,900 hours in the second year, and 900 hours in the third and fourth year, respectively.

(b) Calculate Depreciation Expenses for each year using Double-Declining-Balance Method

A working table is provided on the next page.

Year

Depreciation Expenses

1

$

2

$

3

$

4

$

Homework Answers

Answer #1

Answer:

Double Declining Balance Depreciation Rate = 2 * Straight Line Depreciation Rate
Straight Line Depreciation Rate = 1 / Useful Life
Straight Line Depreciation Rate = 1/ 4 = 25%

Double Declining Balance Depreciation Rate = 2 * 25% = 50%

Depreciation for Year1 = $420,000 * 50% = $210,000
Depreciation for Year2 = ($420,000 - $210,000) * 50% = $105,000
Depreciation for Year3 = ($420,000 - $210,000 - $105,000) * 50% = $52,500
Depreciation for Year3 = $52,500 - $40,000 = $12,500

Year Depreciation Expense Carrying Value
0 420,000
1 210,000 210,000
2 105,000 105,000
3 52,500 52,500
4 12,500 40,000
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