Questions 1-10 with 10 points each, Questions 11-14, Extra Credit with 5 points

Question

Questions 1-10 with 10 points each, Questions 11-14, Extra Credit with 5 points each 7. Sleepy Co. purchased a cost of $240,000. Salvage value was estimated at $40,000. The machine is being depreciated over 10 years by the double-declining balance method. For the year ended December 31,2017, what amount should Sleepy Co. report as depreciation expense on its income statement? What amount should the accumulated depreciation be as of December 31, 2017. a machine that was installed and placed in service on January 1, 2015 at

Explanation / Answer

Answer:- For the year ended December 31,2017 Sleepy co. should report $30720 as depreciation expense on its income statement.

The accumulated depreciation be as of December 31,2017 is $117120 (ie-$48000+$38400+$30720)

Explanation:-

Double Declining balance depreciation is calculated using the following formula:

Depreciation = Depreciation Rate * Book Value of Asset

Depreciation rate is given by the following formula:

Depreciation Rate = Accelerator *Straight Line Rate

Straight-line Depreciation Rate = 1/10 = 0.10 = 10%
Declining Balance Rate = 2*10% = 20

Depreciation 2015 = $240000 *20% = $48000

Book value at end of 2015 = $240000 – $48000 = $192000

Depreciation 2016 = $192000* 20% = $38400

Book value at end of 2016 = $192000 – $38400 = $153600

Depreciation 2017= $153600* 20% = $30720

Book value at end of 2017 = $153600 – $30720 = $122880

Depreciation = Depreciation Rate * Book Value of Asset

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