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Required Informetlon The following Information applies to the questions displayed below.] Ramirez Company Installs a computerized manufacturing machine In its factory at the beginning of the year at a cost of $45,300. The machine's useful life Is estlmated at 10 years, or 403,000 units of product, with a $5,000 salvage value During its second year, the machine produces 34,300 units of product. Determine the machine's second-year depreciation using the double-declining-balance method. ouble-declining-balance Annual Depreciation Choose Factors Choose Factor(%) Ex Beginning book value Double the straight-line rate Depreciation expense First years depreciation Second year's depreciation

Explanation / Answer

The double declining balance depreciation method is an accelerated depreciation method. In this method the depreciation is calculated twice the straight line rate of depreciation.

Formula for calculating depreciation under double declining balance method = 2 x straight line depreciation percentage x book value at the beginning of the period

1) Straight line depreciation =100%/ useful life i.e 100%/10

2)Depreciation rate = 2 x Straight line depreciation percent i.e 2 x 10% =20%

3) Depreciation for a period = Depreciation rate x book value at the beginning period = 20% x 45,300 (First year beginning book value)

So basis the above calculation lets calculate the machine second year depreciation

begining book value x double the straight line rate = Depreciation expense

First year depreciation = $ 45,300 x 20% = $9,060

Second year depreciation= ($45,300-9060)i.e $36,240 x 20% = $7,248

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