Question

On September 30, 2021, Bricker Enterprises purchased a machine for $218,000. The estimated service life is 10 years with a $30,000 residual value. Bricker records partial-year depreciation based on the number of months in service.

Depreciation for 2022, using the double-declining-balance method, would be:

Answer 1

Depreciation rate under double-declining balance method = 2 X Straight line rate of depreciation

First, we need to compute the rate of depreciation under the straight-line method of depreciation

Straight-line depreciation = (Depreciable amount) / Estimated useful life

Depreciable amount = Cost of an asset - residual value

=$218,000 - $30,000

=$188,000

So,

Straight-line depreciation = (Depreciable amount) / Estimated useful life

=$188,000 / 10 Years

=$18,800

Now, we will compute the straight-line rate of depreciation = Straight-line depreciation / Depreciable amount

=$18,800 /$188,000

=10%

Now, we can compute the Depreciation rate under double declining method

Depreciation rate under double declining method = 2 x straight-line rate of depreciation

=2 X 10 %

=20%

In order to compute depreciation for the year 2022, we will make a table to show the computation

In the above computation Net book value is computed by subtracting Double declining balance depreciation from beginning book value

For the year 2021, we have considered depreciation only for 3 months as the machine used only for 3 months in that year

So, Depreciation for 2022 is $41,420 using the double-declining balance method