Depreciation Methods A machine costing $251,800 was purchased May 1. The machine

Question

Depreciation Methods

A machine costing $251,800 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $3,400. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

a. Straight-line: Year 1: $Answer Year 2: Answer Year 3: Answer Year 4: Answer b. Double-declining balance: Year 1: $Answer Year 2: Answer Year 3: Answer Year 4: Answer

Explanation / Answer

For year 1 the depreciation will be charged for 8 months only for year 4 the depreciation charged will be for 4 months remaining straight line depreciation (251,800 - 3,400)/3 82800 a. Straight-line year 1 55200 year 2 82,800 year 3 82,800 year 4 27600 b. Double declining rate = 1/3*2 0.666667 or 66.67% year beginning dep book bal value 1 251800 111911 139889 2 139889 93259 46630 3 46630 31087 15543 4 15543 12143 3400

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