A machine costing $251,800 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $3,400. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

Question

Business

Julianna Mccall

12 March, 17:36

A machine costing $251,800 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $3,400. Calculate the depreciation expense for each year of its expected useful life using each of the following depreciation methods: (a) straight-line, (b) double-declining balance. For double-declining balance, do not round until your final answer. Round your final answers to the nearest dollar.

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Answers (1)

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Bell · Answer 1

Instructions are listed below.

Explanation:

Giving the following information:

A machine costing $251,800 was purchased May 1. The machine should be obsolete after three years and, therefore, no longer useful to the company. The estimated salvage value is $3,400.

A) Straight-line:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (251,800 - 3,400) / 3 = $82,800

B) Double declining balance:

Annual depreciation = 2*[ (original cost - residual value) / estimated life (years) ]

Year 1 = (248,400/3) * 2 = 165,600

Year 2 = 55,200

Year 3 = 18,400