Question

A machine with a cost of $53,300.00 has an estimated residual value of $4,485.00 and an estimated life of 5 years or 16,269 hours. What is the amount of depreciation for the second full year, using the double declining-balance method? Select the correct answer.

Answer 1

Cost of machine = $53,300

Estimated life = 5 years

Double declining depreciation rate = 2 x 1/Estimated life

= 2 x 1/5

= 40%

Depreciation expense for year 1 = Cost of machine x Double declining depreciation rate

= 53,300 x 40%

= $21,320

Book value at the end of year 1 = Cost of machine - Depreciation expense for year 1

= 53,300-21,320

= $31,980

Depreciation expense for year 2 = Book value at the end of year 1 x Double declining depreciation rate

= 31,980 x 40%

= $12,792

The amount of depreciation for the second full year = $12,792