Question

Computing Straight-Line and Double-Declining-Balance Depreciation

On January 2, 2016, Dechow Company purchases a machine to help manufacture a part for one of its key products. The machine cost $306,180 and is estimated to have a useful life of six years, with an expected salvage value of $32,760.
Compute each year's depreciation expense for 2016 and 2017 for each of the following depreciation methods.
a. Straight-line.
b. Double-declining balance.

Answer 1

a.

2016 = $45,570

2017 = $45,570

b.

2016 = $102,080

2017 = $68,014

Step-by-step explanation:

Straight line method

Straight line method charges a fixed amount of depreciation

Depreciation Charge = (Cost - Salvage Value) ÷ Estimated useful life

2016

Depreciation Charge = $45,570

2017

Depreciation Charge = $45,570

Double declining method

Double declining method charges a higher amount of depreciation at the early years and less in the later years

Depreciation Charge = 2 x SLDP x BVSLDP

2016

Depreciation Charge = 2 x 16.67 % x $306,180 = $102,080

2017

Depreciation Charge = 2 x 16.67 % x ($306,180 - $102,080) = $68,014