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

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