Question

Exact Photo Service purchased a new color printer at the beginning of Year 1 for $38,600. The printer is expected to have a four-year useful life and a $3,400 salvage value. The expected print production is estimated at $1,788,000 pages. Actual print production for the four years was as follows:

Year 1		554,500
Year 2		481,600
Year 3		384,200
Year 4		388,700
Total		1,809,000

The printer was sold at the end of Year 4 for $3,550.

Required
a. Compute the depreciation expense for each of the four years, using double-declining-balance depreciation.

Answer 1

The double declining balance method is an accelerated depreciation method.Using this method depreciation is calculated using Book Value
at the beginning of each period is multiplied by a fixed Depreciation Rate which is 200% of the straight line depreciation rate.
The formula to calculate depreciation per year under this method is as under,
Depreciation = 2 x Straight line depreciation rate x book value of asset at the beginning of period
Straight line depreciation per year = [Cost - residual value]/useful life = [$38600 - $3400]/4 years = $8800
Straight line depreciation rate = Depreciation per year / [Cost - residual value] = $8800 / $35200 = 25%
Year	Book value of printer at the beginning	Depreciation rate 50% i.e. 2 x 25%	Depreciation
1	$38,600.00	50%	$19,300.00
2	$19,300.00	50%	$9,650.00
3	$9,650.00	50%	$4,825.00
4	$4,825.00	50%	$2,412.50