Question

Martin Company purchases a machine at the beginning of the year at a cost of $126,000....

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:

Homework Answers

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

Depreciation Schedule
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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