Question

on 1 January co purchase a machine with cost of 150000 expected life of 5 years and residual value of 5000 use double declinifn compute annual deprecition accumulated dep and ending book of first 2 yeara

Answer 1

The company purchased a machine at 150000 , having expected useful life of 5 years , and residual value of 5000,

double declining balance method has double the rate of depreciation of straight line method.

Here the straight line depreciation rate = 1/ useful life = 1/ 5 = 20% ,

So double declining balance method = 2 * straight line method rate = 2 * 20 % = 40 %.

so depreciation for year 1 = Cost * depreciation rate = 150000 * 40% = 60000.

so book value at end of year 1 = cost - depreciation of year 1 = 150000 - 60000 = 90000.

thus year 2 depreciation = 90000 * 40% = 36000.

so accumulated depreciation for year 2 end = 60000 + 36000 = 96000.

The schedule with the requirements are as follows :

Year	Opening Book value	Depreciation Rate	Depreciation expenses	Accumulated depreciation	Book Value year End
1	$            1,50,000	40%	$         60,000	$  60,000	$       90,000
2	$                90,000	40%	$         36,000	$ 96,000	$       54,000