Question

A machine which cost $240,000 is acquired on September 30, 2015. Its estimate salvage value is $30,000 and its expected life is 6 years. Instructions Calculate depreciation expense for 2016 using double declining balance

Answer 1

$70,000

Step-by-step explanation:

* Depreciable cost = $240,000 - $30,000

= $210,000

* Double declining balance rate = 2 * (1 - $30,000 / $240,000) / 6 = 40%

* Depreciation expense = $210,000 * 40% * (11 / 12) = $70,000

Answer 2

Straight line depreciation rate = 1/6 which is 0.1667.

Double declining balance rate = 2 x 0.1667 which is 0.3334

Depreciation expense for 2015= ($240,000-$30,000) x 0.3334 x (3/12) which equals to $47,997.60

Book value at the beginning of 2016 = $240,000 - $47,997.60 which equals to $192,002.40.

Depreciation expense for 2016 = $192,000 x 0:3334 which equals to $64,000.08


Therefore, the depreciation expense for 2016 is $64,000.08