Problem 9-9A Blue Corporation purchased machinery on January 1, 2017, at a cost

Question

Problem 9-9A

Blue Corporation purchased machinery on January 1, 2017, at a cost of $320,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $28,000. The company is considering different depreciation methods that could be used for financial reporting purposes.

Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.

* Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value.

I've used both $28,000 and $12,000 for the annual depreciation expense what did i do wrong? is it supposed to be zero?

Problem 9-9A

Blue Corporation purchased machinery on January 1, 2017, at a cost of $320,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $28,000. The company is considering different depreciation methods that could be used for financial reporting purposes.

Explanation / Answer

Straight line depreciation per year = (Cost - Salvage value) / useful life = ($320000 - $28000)/4 years = $73000 Straight line depreciation rate = Depreciation / Depreciable value = $73000 / $292000 = 25% Straight Line Depreciation Computation End of Year Years Depreciable cost x Depreciation rate = Annual depreciation expense Accumulated Depreciation Book Value 2017 $292,000 x 25% = $73,000 $73,000 $247,000 2018 $292,000 x 25% = $73,000 $146,000 $174,000 2019 $292,000 x 25% = $73,000 $219,000 $101,000 2020 $292,000 x 25% = $73,000 $292,000 $28,000 $292,000 Depreciation per year under double declining balance method = 2 * straight line depreciation rate* Book value of asset at the beginning of year Double Declining Balance Depreciation Computation End of Year Years Book value beginning of year x Depreciation rate = Annual depreciation expense Accumulated Depreciation Book Value 2017 $320,000 x 50% = $160,000 $160,000 $160,000 2018 $160,000 x 50% = $80,000 $240,000 $80,000 2019 $80,000 x 50% = $40,000 $280,000 $40,000 2020 $40,000 x 50% = $20,000 $300,000 $20,000 $300,000

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