Problem 9-9A Riverbed Corporation purchased machinery on January 1 2017, at a co

Question

Problem 9-9A Riverbed Corporation purchased machinery on January 1 2017, at a cost of $310,000. The estim?ated useful life ofthe machinery is 4 years with an estimated salve e value at the end of that period of S32 000. The company is considering different depreciation methods that could be used for financial reporting purposes Your answer is partially correct. Try again. Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. STRAIGHT-LINE DEPRECIATION Computation End of Year Years Depreciable Cost x Depreciation Rate Annual Depreciation Expense Accumulated Depreciation Book Value 2017 278000 69500 69500 08500 278000 139000 2019 208500 2020 78000 32000 278000

Explanation / Answer

Depreciation under straight line method

= Depreciable amount / Useful life

or

Depreciable amount x Depreciation rate

= (Purchase cost – Salvage value) / Useful life

= ($310,000 - $32,000) / 4

= $69,500

Depreciation rate under straight line method

= 1 / Usefil life

= 1 / 4

= 0.25 or 25%

Depreciation schedule is calculated as below

Depreciation under double declining method

Book value at the beginning of the year x Depreciation rate under double declining balance method

Book value at the beginning of a year

= Book value at the beginning of previous year – Depreciation of previous year

Depreciation rate under double declining balance method

= 1 / Usefil life x 2

= 1 / 4 x 2

= 0.50 or 50%

Depreciation schedule is calculated as below

Calculations A = As calculated B = As calculated C = A x B D = Cumulative C E = $310,000 - D Years Depreciable cost Depreciation rate Annual depreciation expense Accumulated depreciation Book value 1     278,000.00 25%          69,500.00          69,500.00    240,500.00 2     278,000.00 25%          69,500.00       139,000.00    171,000.00 3     278,000.00 25%          69,500.00       208,500.00    101,500.00 4     278,000.00 25%          69,500.00       278,000.00      32,000.00

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