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Computing Straight-Line and Double-Declining-Balance Depreciation On January 2, 2016, Fischer Company purchases a machine that manufactures...

Computing Straight-Line and Double-Declining-Balance Depreciation
On January 2, 2016, Fischer Company purchases a machine that manufactures a part for one of its key products. The machine cost $529,200 and is estimated to have a useful life of six years, with an expected salvage value of $45,000.

Compute depreciation expense for 2016 and 2017 for the following depreciation methods.
a. Straight-line.
b. Double-declining balance.

2016 2017
Straight-line $Answer $Answer
Double-declining Answer Answer

need help solving this problem thank you

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Expert Solution

Answer a.

Cost of Machine = $529,200
Salvage Value = $45,000
Useful Life = 6 years

Annual Depreciation = (Cost of Machine - Salvage Value) / Useful Life
Annual Depreciation = ($529,200 - $45,000) / 6
Annual Depreciation = $80,700

Depreciation for 2016 = $80,700
Depreciation for 2017 = $80,700

Answer b.

Cost of Machine = $529,200
Salvage Value = $45,000
Useful Life = 6 years

Straight-line Depreciation Rate = 1 / Useful Life
Straight-line Depreciation Rate = 1 / 6

Double-declining Depreciation Rate = 2 * Straight-line Depreciation Rate
Double-declining Depreciation Rate = 2 * 1/6
Double-declining Depreciation Rate = 1/3

Depreciation for 2016 = $529,200 * 1/3
Depreciation for 2016 = $176,400

Book Value of Machine at the end of 2016 = $529,200 - $176,400
Book Value of Machine at the end of 2016 = $352,800

Depreciation for 2017 = $352,800 * 1/3
Depreciation for 2017 = $117,600

Book Value of Machine at the end of 2017 = $352,800 - $117,600
Book Value of Machine at the end of 2017 = $235,200

ekkarill92 answered 1 year ago
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