Question

A machine costing $85,000 with a 5-year life and $10,000 residual value was purchased January 2, 2019 Compute depreciation for each of the five years, using the declining-balance. Depreciation Expense (Show Calculation)

(1) Year 1

( 2) Year 2

(3) Year 3

(4) Year 4

(5) Year 5

Answer 1

Double Decling Balance:

Year	Beginning Balance ( a)	Dep.Rate ( b)	Dep. Expense ( a*b) =c	Ending Bal. ( a- c) = D
1	$85,000	40%	$34,000	$51,000
2	$51,000	40%	$20,400	$30,600
3	$30,600	40%	$12,240	$18,360
4	$18,360	40%	$7,344	$11,016
5	$11016	-	$1016	$10,000

Explanation:

1) Dep .Rate:

= 1/ Useful Life * 2 * 100

= 1/5 *2 *100 = 40%

2) Dep.Exp can not exceed salvage value. Therfore 5th year's exp would be :

( Beginng Value at 5th year - Salvage Value)

= ( $ 11,016 - $ 10,000 ) = $ 1016