On January 2, 2018, the Jackson Company purchased equipment to be used in its ma

Question

On January 2, 2018, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $59,875. The expenditures made to acquire the asset were as follows: Purchase price $ 253,000 Freight charges 9,200 Installation charges 13,000 Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life. Required: 1. Calculate depreciation for each year of the asset’s eight-year life.

Explanation / Answer

Cost of assets = 253000+9200+13000 = 275200

Residual value = 59875

Double decline rate = 100/8*2 = 25%

Depreciation expense 2018 275200*25% = 68800 2019 275200*75%*25% = 51600 2020 275200*75%*75%*25% = 38700 2021 275200*75%*75%*75%*25% = 29025 2022 (275200-188125-59875/4) = 6800 2023 6800 2024 6800 2025 6800

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