Question

The Rialto Theatre purchased a new projector costing $123,000 on January 1, 2017. Because of changing technologies, the projector is estimated to last four years after which it will be obsolete and have a salvage value of $6,000 as a collectors’ item.

Compute the depreciation expense for 2017 using:

a. The straight-line method

b. Double-declining-balance method

Answer 1

Depreciation of year 2017

Straight line method	$      29,250
Double declining Method	$ 61,500

Working

Straight line Method
A	Cost	$ 123,000
B	Residual Value	$ 6,000
C=A - B	Depreciable base	$ 117,000
D	Life [in years left ]	4
E=C/D	Annual SLM depreciation	$ 29,250

.

Double declining Method
A	Cost	$ 123,000
B	Residual Value	$ 6,000
C=A - B	Depreciable base	$ 117,000
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$ 29,250
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

.

Depreciation schedule-Double declining
Annual period	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2017	$ 123,000	50.00%	$ 61,500	$ 61,500	$ 61,500