Question

Monty Corporation purchased machinery on January 1, 2022, at a cost of $270,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $32,000. The company is considering different depreciation methods that could be used for financial reporting purposes.

(a)

Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.

STRAIGHT-LINE DEPRECIATION
		Computation							End of Year
Years		Depreciable Cost	x	Depreciation Rate		=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2022		$enter a dollar amount		enter a Depreciation Rate in percentages	%		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
2023		enter a dollar amount		enter a Depreciation Rate in percentages	%		enter a dollar amount		enter a dollar amount		enter a dollar amount
2024		enter a dollar amount		enter a Depreciation Rate in percentages	%		enter a dollar amount		enter a dollar amount		enter a dollar amount
2025		enter a dollar amount		enter a Depreciation Rate in percentages	%		enter a dollar amount		enter a dollar amount		enter a dollar amount
							$enter a total for the Annual Depreciation Expense column in dollars

DOUBLE-DECLINING-BALANCE DEPRECIATION
		Computation							End of Year
Years		Book Value Beginning of Year	×	Depreciation Rate		=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2022		$enter a dollar amount		enter a Depreciation Rate in percentages	%		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
2023		enter a dollar amount		enter a Depreciation Rate in percentages	%		enter a dollar amount		enter a dollar amount		enter a dollar amount
2024		enter a dollar amount		enter a Depreciation Rate in percentages	%		enter a dollar amount		enter a dollar amount		enter a dollar amount
2025		enter a dollar amount		enter a Depreciation Rate in percentages	%		1,750	*	enter a dollar amount		enter a dollar amount
							$enter a total for the Annual Depreciation Expense column in dollars

^* Depreciation expense for 2020 under Double declining-balance is adjusted so that ending book value is equal to salvage value.

Answer 1

(a)

Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.

STRAIGHT-LINE DEPRECIATION
		Computation							End of Year
Years		Depreciable Cost	x	Depreciation Rate		=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2022		270000-32000 = 238000	*	25	%	=	59500		59500		210500
2023		238000	*	25	%	=	59500		119000		151000
2024		238000	*	25	%	=	59500		178500		91500
2025		238000	*	25	%	=	59500		238000		32000
							238000

DOUBLE-DECLINING-BALANCE DEPRECIATION
		Computation							End of Year
Years		Book Value Beginning of Year	×	Depreciation Rate		=	Annual Depreciation Expense		Accumulated Depreciation		Book Value
2022		270000	*	50	%	=	135000		135000		135000
2023		135000	*	50	%	=	67500		202500		67500
2024		67500	*	50	%	=	33750		236250		33750
2025		33750		50	%	=	1750		238000		32000
							$238000