Question

Martin Company purchases a machine at the beginning of the year at a cost of $126,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $10,500 salvage value. The machine’s book value at the end of year 3 is:

Answer #1

Depreciation rate = (1/4) x 2 = 50%

Year 1 depreciation = 126,000 x 50% = 63,000

Year 2 depreciation = (126,000 - 63,000) x 50% = 31,500

Year 3 depreciation = (126,000 - 94,500) x 50% = 15,750

Year |
Book Value Year
Start |
Depreciation
Expense |
Accumulated
Depreciation |
Book Value Year
End |

1 |
126,000 | 63,000 | 63,000 | 63,000 |

2 |
63,000 | 31,500 | 94,500 | 31,500 |

3 |
31,500 | 15,750 | 110,250 | 15,750 |

**Machine's book value at the end of year 3 is
$15,750**

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