Question

Depreciation Methods A machine costing $180,000 was purchased May 1. The machine should be obsolete after...

Depreciation Methods

A machine costing $180,000 was purchased May 1. The machine should be obsolete after four years and, therefore, no longer useful to the company. The estimated salvage value is $15,000. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

a. Straight-line:
Year 1: Answer
Year 2: Answer
Year 3: Answer
Year 4: Answer
Year 5: Answer
b. Double-declining balance:
Year 1: Answer
Year 2: Answer
Year 3: Answer
Year 4: Answer

Homework Answers

Answer #1

Answer a

Amount
Year 1 $ 27,500
Year 2 $ 41,250
Year 3 $ 41,250
Year 4 $ 41,250
Year 5 $ 13,750

Calculations:

Amount in $
Year 1 =((180,000-15,000)/4)*8/12
Year 2 =((180,000-15,000)/4)
Year 3 =((180,000-15,000)/4)
Year 4 =((180,000-15,000)/4)
Year 5 =((180,000-15,000)/4)*4/12

Answer b

Amount
Year 1 $ 60,000
Year 2 $ 60,000
Year 3 $ 30,000
Year 4 $ 15,000
Year 5 $   2,500

Calculations:

Depreciation rate = 100 / 4 * 2 = 50%

Amount in $
Year 1 =180,000*50%*8/12
Year 2 =(180,000-60,000)*50%
Year 3 =(180,000-60,000-60,000)*50%
Year 4 =(180,000-60,000-60,000-30,000)*50%
Year 5 =(180,000-60,000-60,000-30,000-15,000)*50%*4/12

In case of any doubt, please comment.

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