Near Company purchased a machine on January 1, 2017, by paying cash of $85,000.

Question

Near Company purchased a machine on January 1, 2017, by paying cash of $85,000. The machine has an estimated useful life of five years, is expected to produce 30,000 units, and has an estimated residual value of $10,000.

Required:
Calculate depreciation expense to the nearest whole dollar for each year of the machine's useful life under:

a. Straight-line depreciation method.

b. Double declining-balance method.

c. If the machine was used to produce and sell 4,800 units in 2017, what would be the depreciation expense using the units-of-production method?  

d. What is the book value of the machine after three years using the double declining-balance method?

e. What is the book value of the machinery after three years using the straight-line method?

Explanation / Answer

a) Straight line depreciation method:

b) Double declining-balance method.

c) Depreciation expense = (85000-10000/30000)*4800 = 12000

d) Book value after three year using double decline = (85000*60%*60%*60%)= 18360

e) Book value of machine after straight line method = (85000-45000) = 40000

Depreciation expense 2017 (85000-10000/5) = 15000 2018 15000 2019 15000 2020 15000 2021 15000

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