Question

In: Accounting

Wildcat, Inc. purchases a machine on January 1, 2016 at a cost of $555,000.  The machine will...

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

Solutions

Expert Solution

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.

Kindly comment if you need further assistance. Thanks

ekkarill92 answered 2 years ago
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