Question

A machine costing $98,750 with a 5-year life and $5,900 residual value was purchased January 2. Compute depreciation for each of the five years, using the double-declining-balance method.

Year 1:

Year 2:

Year 3:

Year 4:

Year 5:

Answer 1

Answer :

Asset cost = $98,750

lfie = 5 years

residual value = $ 5,900

rate of depreciation under straight line method = 1 / 5 = 20%

under double declining method = 40%

Double declining depreciation = 2*(asset cost- salvage value)/life

i)Depreciation for year 1 :

= 2(98,750 - 5,900)/ 5

= 37,140

or 92,850 * 40% = 37,140

ii)Depreciaiton in 2nd year = (92,850 -37,140)*40% = 22,284

iii)Depreciaiton in 3rd year = (55,710 - 22,284) *40% = 13,370

iv)Depreciationi 4th year = (33,426 - 13,370)*40% = 8,022

v)Depreciation inn 5th year = (20,056 - 8,022)*40% = 4,813