Question

Top Line Electronics has a piece of machinery that costs $600,000 and is expected to have a useful life of 4 years. Residual value is expected to be $100,000. Using the double-declining-balance method, what is depreciation expense for the first year

Answer 1

Annual depreciation= $250,000

Step-by-step explanation:

Giving the following information:

Purchase price= $600,000

Salvage value= $100,000

Useful life= 4 years

To calculate the annual depreciation, we need to use the following formula:

Annual depreciation= 2*[(book value)/estimated life (years)]

Annual depreciation= 2*[(600,000 - 100,000) / 4]

Annual depreciation= $250,000