Ramirez Company installs a computerized manufacturing machine in its factory at
ID: 2604164 • Letter: R
Question
Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $80,600. The machine's useful life is estimated at 10 years, or 388,000 units of product, with a $3,000 salvage value. During its second year, the machine produces 32,800 units of product Exercise 8-6 Double-declining-balance depreciation LO P1 etermine the machine's second-year depreciation using the double-declining-balance method. Double-declining-balance Depreciation Choose Factor(%) -| Annual Depreciation Expense Choose Factors: Depreciation expense First year's depreciation Second year's depreciationExplanation / Answer
Double declining balance depreciation expense is the twice of straight line method of deprecition expense. So in the above question the percentage of straight line method of depreciation 10% as the useful life of the machine is 10 years. so the depreciation percentage in double declining balance method is 20%(i.e, 2*10%)
1st year depreciation under double declining balance method = Cost of the machine*Percentage of depreciation = 80600*20% =16120
2nd year depreciation under double declining balance method = (80600-16120)*20% = 12896
Annual depreciation under straight line method = (Cost of the Trencher-Salvage value)/Useful life of the machine = (282000-41000)/5 = 48200
Depreciation expense for the year ending december 2016 = 48200*9/12 = 36150
Depreciation expense for the year ending december 2017 = 48200
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