Question

new machine for $60,000. The machine is expected to operate for ten years, after which it will be sold for salvage value (estimated to be $2,000). How much is the first and second year’s depreciation expense if the company uses the double-declining-balance method?

Answer 1

The answers are:

• Year 1 depreciation = $12,000
• Year 2 depreciation = $9,600

Step-by-step explanation:

To calculate the depreciation expense using the double declining balance method we can do the following:

For years 1 and 2 we will use double depreciation 20% [= (100% / 10) x 2]

Year 1 depreciation = $60,000 × 20% =$12,000

Book value end of year 1 = $60,000 - $12,000 = $48,000

Year 2 depreciation = $48,000 × 20% =$9,600