Final answer:
The double declining balance method is a depreciation method that allows for a faster write-off of an asset's value in the early years of its life. To calculate the depreciation using this method, you need to know the cost of the asset, the salvage value, and the useful life.
Step-by-step explanation:
The double declining balance method is a depreciation method that allows for a faster write-off of an asset's value in the early years of its life. To calculate the depreciation using this method, you need to know the cost of the asset, the salvage value, and the useful life.
In this case, the cost of the new machinery is $100,100 and the salvage value is $5,340. The useful life of the machine is 10 years or 92,000 working hours.
Step 1: Determine the straight-line depreciation rate by dividing 1 by the useful life, which is 1/10 or 0.1.
Step 2: Multiply the straight-line depreciation rate by 2 to get the double declining balance rate, which is 0.1 x 2 = 0.2 or 20%.
Step 3: Multiply the double declining balance rate by the book value of the asset at the beginning of the year to get the depreciation expense for the year.
Step 4: Subtract the depreciation expense from the book value to get the new book value at the end of the year.
Step 5: Repeat steps 3 and 4 for each year until the book value reaches the salvage value.
Using this method and the given information, the depreciation expense for the first year would be $20,020 (0.2 x $100,100) and the new book value at the end of the year would be $80,080 ($100,100 - $20,020).