Question

Part A. On January 2, 2019, a machine was purchased for $180,000. It has an estimated useful life of ten years and an estimated residual value of $14,000. The company uses the declining-balance method of depreciation with a declining balance rate of 20%.

Depreciation expense for 2019 = $________________________.

  

Depreciation expense for 2020 = $_________________________.

Answer 1

1.

Cost of machine = $180,000

Useful life = 10 year

Estimated residual value = $14,000

Declining balance rate = 20%

Depreciation expense for 2019 = Cost of machine x Declining balance rate

= 180,000 x 20%

= $36,000

2.

Book value of machine at the end of year 2019 = Cost of machine - Depreciation expense for 2019

= 180,000 - 36,000

= $144,000

Depreciation expense for 2020 = Book value of machine at the end of year 2019 x Declining balance rate

= 144,000 x 20%

= $28,800

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