Question

1-Numo Company purchased a new machine on September 1, 2017, at a cost of $145,000. The company estimated that the machine will have a salvage value of $25,000. The machine is expected to be used for 20,000 working hours during its 5-year life.

2-Numo Company purchased a new machine on January 1, 2017, at a cost of $145,000. The company estimated that the machine will have a salvage value of $25,000. The machine is expected to be used for 20,000 working hours during its 5-year life.

Instructions: compute the depreciation expense for the year 2017 according to the declining-balance method using double the straight-line rate.

Answer 1

Solution:

	Machine Purchased on September 1 ,2017	Machine Purchased on January 1 ,2017	Total
Depreciation Expense for 2017	$                                       19,333.33	$                        58,000.00	$           77,333.33

Working:

	Machine Purchased on September 1 ,2017	Machine Purchased on January 1 ,2017	Total
Depreciation Expense for 2017	145000*40%*4/12	145000*40/100	$           77,333.33

Notes:

1) Depreciation Rate = 1 / Useful Life * 2 = 1 /5 * 2 = 40% [Same for both the machines]

2) Machine Purchased on September 1 ,2017 will be depreciated for 4 months only