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

 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

 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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