Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

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Mathematics

Rodolfo Mckinney

29 January, 04:23

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

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Wayne Thomas · Answer 1

Depreciation base = Cost of machine - Salvage value = 24000-4000 = $20,000

Yearly depreciation expense = Depreciation cost / Life = 20,000/5 = $4,000

Straight line rate of depreciation = 4,000/20,000 = 0.2 = 20%

Double-declining-balance method rate = 20*2 = 40% = 0.4

Year 1 depreciation expense = 24000*0.4 = $9,600

Year 2 depreciation expense = (24000-9600) * 0.4 = $5,760

Therefore, depreciation expense for year 2 is $5,760