Question

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2015. A machine was purchased on January 1, 2014 at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. What should have been booked as depreciation expense in fiscal 2015?

Answer 1

Ans:

Depreciation under double declining balance method for the year 2014

                   %of depreciation=1/useful life*2

                               1/10years*2=20%

               Given cost of the asset =1,50,000$

Depreciation expense for the year 2014=$1,50,000*20%

                                                                      =30,000$

                       Book value as on 1-1-2015=1,50,000-30,000

                                                                      =1,20,000$

in the year 2015 change in method of depreciation to SLM

   so depreciation=Book value-residual value/remaining useful life

Depreciation expense for the year 2015=1,20,000-9,000/9years

                                                                        =12,333$