Porter, Inc., acquired a machine that cost $375,000 on October 1, 2010. The mach

Question

Porter, Inc., acquired a machine that cost $375,000 on October 1, 2010. The machine is expected to have a five-year useful life and an estimated salvage value of $38,000 at the end of its life. Porter, Inc., uses the calendar year for financial reporting. Depreciation expense for one-fourth of a year was recorded in 2010.

Using the double-declining-balance depreciation method, calculate the depreciation expense for the year ended December 31, 2012, and the net book value of the machine at that date. (Round your answer to the nearest dollar amount.

Depreciation expense $
Net book value $

Explanation / Answer

Straight line rate is 1/5 = .2 Double declining rate is twice straight line rate or .2*2 = .4 Double declining does not take salvage value into consideration in calculation but does not depreciate to below salvage. depreciation in 2010: 375000*.4*3/12 = 37500. Book value at end of 2010 = 375000- 37500= 337500 depreciaiton in 2011: 337500*.4 = 135000 book value at end of 2011 = 337500 - 135,000 = 202500 Depreciation in 2012: 202500*.4 = 81000 book value at end of 2012 = 202500 - 81000 = 121500 answer: depreciation expense for 2012 = $81000 net book value = $121500

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