Question

A machine that cost $46,000 on January 1, 2015 was depreciated by Ava Company using the double declining method. The machine had a $2,200 residual value and a useful life of 10 Years. On January 1. 2017, the company switched to the straight line method.

What is the depreciation expense for the year ended December 31, 2017?

Answer 1

Depreciation for the year 2017=$ 3405(See working note)

Working Note

Depreciation as per double declining method=2*straight line depreciation percent*book value at the beginning of the accounting period.

Useful life=10 year

Straight Line depreciation percent=1/10=0.1=10 %

Depreciation rate for double declining method= 2*10%= 20%

Depreciation for the year 2015=                $ 46,000*0.2=$ 9200

Depreciation for the year 2016=($ 46,000-$ 9200)*0.20=$ 7360

Total Depreciation for the year 2015 and 2016=$ 16,560

Depreciation for the year 2017=Straight line depreciation method

Annual Depreciation Expense=(Asset Cost-Residual value)/useful life of the asset

Already depreciation is calculated as per double declining method method for 2 years

Therefore Depreciation as per straight line method={( $ 46,000-$16560)-$ 2200}/8=$ 3405