Compute the allowable BOOK depreciation amounts for each year of a machine that costs $55,000 to...

Compute the allowable BOOK depreciation amounts for each year of a machine that costs $55,000 to purchase, and $4,000 to install with a 5 year life. Use the DDB method (factor=2) switching to straight line and salvage=0. What is the allowable depreciation for year 4?

The answer is not 5098!!!

Solutions

Expert Solution

As per Double declining method, allowable depreciation for Year 4 is $ 5,097.60

Working:


a.	Cost of project			55,000
	Installion cost			4,000

	Total Cost of Machne			59,000

b.	Straight line rate			1/5	=	20%
	Double declining rate			2*20%	=	40%

c.	Depreciation schedule under double declining balance;

	Year	Beginning Book Value			Depreciation expense		Ending Book Value
			a		b=a*40%		c=a-b
	1		$ 59,000.00		$ 23,600.00		$ 35,400.00
	2		$ 35,400.00		$ 14,160.00		$ 21,240.00
	3		$ 21,240.00		$ 8,496.00		$ 12,744.00
	4		$ 12,744.00		$ 5,097.60		$ 7,646.40
	5		$ 7,646.40		$ 3,058.56		$ 4,587.84

ekkarill92 answered 1 year ago

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