Question

Please include the formula used to solve.

1)On January​ 1, 2013, Zane Manufacturing Company purchased a machine for​ $40,000. The company expects to use the machine a total of​ 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is​ $4,000. The company used the machine​ 8,000 hours in 2013 and​ 12,000 in 2014. What is the book value of the machine at the end of 2014 if the company uses double minus declining balance​ depreciation? A. ​$28,000 B. ​$13,333 C. ​$17,778 D. ​$20,000

2) An asset was purchased for​ $12,000. The​ asset's estimated useful life was 5 years and its residual value was​ $2,000.

Straight-line depreciation was used. How much gain or loss is reported if the asset is sold for​ $400 at the end of the fifth​ year?

A.

​$1,600 loss

B.

​$1,600 gain

C.

No gain or loss

D.

​$500 gain

Answer 1

1. Answer Option C $17,778

Double Declining Balance method
Double declining Balance depreciation = 2 × Straight-line depreciation rate × Book value at the beginning of the year
Depreciation rate = 100% / Life of the Asset
= 100%/6
=16.66%
Depreciation rate under Double Declining Rate = 2 x 10% = 33.33%
Double Declining Balance method
Year	Net book value at the beginning of the year	Annual Depreciation @20%	Net book value at the end of the year
2013	40,000	13,333	26,667
2014	26,667	8,889	17,778

2. Annswer: Option $1600 Loss

Depreciation under Straight line method
	depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
	= ($12000 - $2000)/5
	=$10000 / 5
	=$2000 per year
Depreciation expense per year = $13090
Year	Opening Carrying Amount	Depreciation Expense	Book value
1	12,000	2,000	10,000
2	10,000	2,000	8,000
3	8,000	2,000	6,000
4	6,000	2,000	4,000
5	4,000	2,000	2,000

Gain or Loss on sale of Asset = Sale Value - Book Value of Asset = $400-$2000 = -$1600

Loss = $1600