Question

A machine costing $91,800 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 $5,400. 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.

Answer 1

(a) straight-line

deprecation expense per year = ($91,800 - $5,400) / 3 years = $86,400 / 3 years = $28,800 per year

(b) double-declining balance

depreciation expense year 1 = 2 x 1/3 x $91,800 = $61,200

depreciation expense year 2 = 2 x 1/3 x $30,600 = $20,400

depreciation expense year 3 = $20,400 - $5,400 = $15,000