Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $81,400. The machine's useful life is estimated at 20 years, or 387,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 32,700 units of product.

Required:
Determine the machine's second-year depreciation using the double-declining balance method.

Answer 1

$7,326

Step-by-step explanation:

Double Decline Balance = 2 x SLDP x SLDBV

where,

SLDP = Straight Line Depreciation Percentage

= 100 ÷ useful life

= 100 ÷ 20

= 5 %

and

SLDBV = Straight Line Percentage Book Value

Year 1

Double Decline Balance = 2 x 5% x $81,400

= $8,140

Year 2

Double Decline Balance = 2 x 5% x ($81,400 - $8,140)

= $7,326

Therefore

The machine's second-year depreciation using the double-declining balance method is $7,326.