Question

On January 1, 2021, Poole Inc. purchased a bottle filler at a cost of $40,000. The equipment is expected to last eight years and have a residual value of $4,000. During its eight-year life, the equipment is expected to produce 250,000 units of product. In 2021 and 2022, 42,000 and 76,000 units, respectively, were produced. Required: Compute depreciation for 2021 and 2022 and the book value of the bottle filler at December 31, 2021 and December 31, 2022, assuming the double-declining-balance method is used.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Purchase price= $40,000

Salvage value= $4,000

Useful life= 8 years

To calculate the depreciation per year using the double-declining balance method, we need to use the following formula:

Annual depreciation= 2*[(book value)/estimated life (years)]

2021:

Annual depreciation= 2*[(40,000 - 4,000) / 8]

Annual depreciation= $9,000

Book value= 40,000 - 9,000= $31,000

2022:

Annual depreciation= 2*[(36,000 - 9,000) / 8]

Annual depreciation= $6,750

Book vale= 31,000 - 6,750= $24,250