Question

Depreciation calculation methods—partial year Freedom Co. purchased a new machine on July 2, 2013, at a total installed cost of $44,000. The machine has an estimated life of five years and an estimated salvage value of $6,000.

a. Calculate the depreciation expense for each year of the asset’s life using:
1. Straight-line depreciation.
2. Double-declining-balance depreciation.
3. 150% declining-balance depreciation.

b. How much depreciation expense should be recorded by Freedom Co. for its fiscal year ended December 31, 2013, under each of the three methods? (Note: The machine will have been used for one-half of its first year of life.)
c. Calculate the accumulated depreciation and net book value of the machine at December 31, 2014, under each of the three methods.

Answer 1

a.

1. $7,600

2. $17,600

3. $13,200

b.

1. $3,800

2. $8,800

3. $6,600

c.

1. $15200

2. $35,200

3. $26,400

Step-by-step explanation:

1. Straight Line Depreciation Method

$44,000 - $6,000 / 5 years

= $7,600.

2. Double declining- balance Method

100% / 5 years = 20%

20% * 2 = 40%

$44,000 * 40% = $17,600

3. 150% declining- balance Method

150% / 5 years = 30%

$44,000 * 30% = $13,200

b. Because this is for 6 months only the depreciation expense calculated will be divided into 2

1. $7,600 / 2 = $3,800

2. $17,600 / 2 = $8,800

3. $13,200 / 2 = $6,600

c.

1. $7,600 * 2 = $15200

2. $17,600 * 2 = $35,200

3. $13,200 * 2 = $26,400