In: Accounting
Wildcat, Inc. purchases a machine on January 1, 2016 at a cost of $555,000. The machine will be depreciated over a 8-year useful life by using the double-declining balance method. The managers estimate that the machine will have a salvage value of $50,00 at the end of its useful life. What is the machine's carrying amount at December 31, 2018?
a. |
$416,250 |
|
b. |
$312,188 |
|
c. |
$234,141 |
|
d. |
$175,605 |
Cost of machine = $555,000
Salvage value = $50,000
Useful life = 8 years
Double declining depreciation rate = 2 x 1/Useful life
= 2 x 1/8
= 25%
Double Declining Depreciation Method | ||||
Year | Beginning Value | Depreciation expense (Beginning Value x Depreciation rate) | Accumulated depreciation ( To be recorded each year) | Ending Value |
2016 | 555,000 | 138,750 | 138,750 | 416,250 |
2017 | 416,250 | 104,063 | 242,813 | 312,188 |
2018 | 312,188 | 78,047 | 320,859 | 234,141 |
The machine's carrying amount at December 31, 2018 = $234,141
Correct option is c.
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