Question

ABC Co. acquired a new machine that cost $84,000 in early 2016. The machine is expected to have a five year useful life and is estimated to have a salvage value of $14000 at the end of the its life.

A) using the straight-line depreciation method, calculate the depreciation to be recognized in the seconf year of the machine's life and calculate the accumulated depreication after the 3rd year.
B) Using the double-devlinging-balance depreciation method, calculate the dep. expense for the 3rd year and the net book value of the machine at this point in time.

Answer 1

a) using the straight-line depreciation method, calculate the depreciation to be recognized in the seconf year of the machine's life and calculate the accumulated depreication after the 3rd yea

Depreciation in second year = (84000-14000/5) = 14000 per year

Accumlated depreciation after 3rd year = 14000*3 = 42000

b) Using the double-devlinging-balance depreciation method, calculate the dep. expense for the 3rd year and the net book value of the machine at this point in time.

Double decline rate = 100/5*2 = 40%

Depreciation expense for third year = 84000*60%*60%*40% = $12096

Net book value at the end of third year = 84000*60%*60%*60% = $18144