Question

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

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.