17. A machine costing $450,000 with a four-year life and an estimated $30,000 sa

Question

17. A machine costing $450,000 with a four-year life and an estimated $30,000 salvage value is installed by Lux Company on January 1. The factory estimates the machine will produce 1,050,000 units of product during its life. It actually produces the following units for the first 2 years: Year 1, 260,000: Year 2, 275,000. Enter the depreciation amounts for years 1 and 2 in the table below for each depreciation method. Show calculation of amounts below the table. Three (3) points Straight-Line Units-of-Production Double-Declining Balance Year 1 Year 2

Explanation / Answer

Double-declining balance = 2 × Straight-line depreciation rate × Book value at the beginning of the year

Year 1  Double-declining balance = 2 × Straight-line depreciation rate × Book value at the beginning of the year

= 2*25%*450000

= 225,000$

Year 2 Double-declining balance = 2 × Straight-line depreciation rate × Book value at second year

= 2 * 25% * ($450000-225000)

=$ 112,500

Depreciation Expense: Straight-line Method = Machine cost - Salvage Value Useful Life

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