Question

On January 1, 2016, Fisher Company purchases a machine that manufactures a part for one of its key products. The machine cost $210,000 and is estimated to have a useful life of 4 years, with an expected salvage value of $34,000. Compute (1) depreciation expense, (2) accumulated depreciation, and (3) net book value of the machine for 2016 using the double-declining methods.

Group of answer choices

88,000; 88,000; 122,000

105,000; 105,000; 105,000

105,600; 105,600; 158,400

63,360; 168,960; 95,040

Answer 1

Answer: option b. 105,000; 105,000; 105,000

Given Data,

Machine Cost $ 2,10,000

Estimated useful life 4 years

Estimated Salvage Value $ 34,000

Calculation of Depreciation expense, Accumulated depreciation & Net book Value of machine using Double-declining balance method :

Year	Beginning Book Value	Rate (Working Note)	Depreciation	Accumulated Depreciation	Net book Value
(i)	(ii)	(iii)	(iv)[(ii)*(iii)]	(v)	(vi)[(ii)-(iv)]
2016	$                         2,10,000	50%	$      1,05,000	$      1,05,000	$            1,05,000

Thus,

Depreciation Expense	Accumulated Depreciation	Net book Value
$                         1,05,000	$                                   1,05,000	$            1,05,000

Answer is option b. 105,000; 105,000; 105,000

Working Note:

Depreciation Rate = (1 / Estimated Useful life) * 100

= ( 1/ 4 ) * 100

= ( 1/ 4 ) * 100

= 25 %

In Double Declining Balance method:

Rate of Depreciation = 2 * Depreciation rate

= 2 * 5

= 50%

Note:

Accumulated depreciation is a accumulation of depreciation from beginning year.

For 1st year, Depreciation & accumulated depreciation both are same.