Question

Required information [The following information applies to the questions displayed below.] On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $39,300. The drill press is expected to last 10 years and has a residual value of $6,300. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 26,500 and 87,000 units, respectively, were produced. Required: Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the double-declining-balance method is used.

Answer 1

Answer:- Double Declining balance depreciation is calculated using the following formula:

Depreciation = Depreciation Rate * Book Value of Asset

Depreciation rate is given by the following formula:

Depreciation Rate = Accelerator *Straight Line Rate

Straight-line Depreciation Rate = 1/10 = 0.10 = 10%
Declining Balance Rate = 2*10% = 20%

Depreciation for 2018 = $39300 *20% = $7860

Book value at end of 2018 = $39300 – $7860 = $31440

Depreciation for 2019 = $31440* 20% = $6288

Book value at end of 2019 = $31440 – $6288 = $25152