Question

Carla Industries purchased a new lathe on January 1, 2017, for $285,000. Carla estimates that the lathe will have a useful life of four years and that the company will be able to sell it at the end of the fourth year for $57,000. Compute the depreciation expense that Carla Industries would record for 2017, 2018, 2019, and 2020 under each of the following methods:

(1)		Straight-line depreciation
(2)		Double-declining-balance depreciation

Date		Straight-line depreciation method		Double-declining-balance depreciation method
12/31/17		$		$
12/31/18
12/31/19
12/31/20

Answer 1

Depreciation expense (SLM) = (Cost - Salvage value)/Useful life

= (285,000-57,000)/4 = 57,000

Double declining rate = 200/Useful life = 200/4 = 50%

	Straight line	Double declining
12/31/17	57,000	(285,000*50%) = 142,500
12/31/18	57,000	(285,000-142,500)*50% = 71,250
12/31/19	57,000	(285,000-142,500-71,250)*50% = 35,625
12/31/20	57,000	(285,000-142,500-71,250-35,625)*50% = 17,812.50

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